Difference Between ETF and Index Fund
5paisa Research Team
Last Updated: 27 Jan, 2025 04:08 PM IST
![banner banner](/themes/custom/fivepaisa/images/banner-img.png)
Content
- ETF vs Index Fund – Which Is Better?
- What is an ETF?
- Define Index Fund?
- What do Index Funds and ETFs Have in Common?
- Differences Between ETFs and Index Funds
- Conclusion
ETF vs Index Fund – Which Is Better?
Index funds and exchange-traded funds are no doubt excellent wealth-building tools that deliver amazing results in varied investment scenarios. But you must be aware that most of the time, index funds are often mistaken as ETFs and vice-versa.
ETF vs index fund both are low-cost and passively managed. Along with that, they are one of the best investment vehicles that offer built-in diversification. In short, these funds bundle several securities into one investment while offering broader exposure to several businesses. Considering these qualities, an ETF vs index fund is ideal for the average investor.
So to understand both of them in a better way, let's compare these two types of investments to help you decide which one to go with.
More About Mutual Funds
- What is SIF (Specialised Investment Fund)?
- What Are Liquidity ETFs?
- Why Invest in ETFs Through SIPs?
- Difference Between ETFs and Stocks
- What is Gold ETF?
- Can We Pledge on Mutual Funds?
- Risks in Mutual Funds Investments
- Know How to Transfer Mutual Funds
- NPS vs ELSS
- XIRR vs CAGR: Understanding Investment Return Metrics
- SWP and Dividend Plan
- What is Solution Oriented Mutual Funds?
- Growth Vs Dividend Reinvestment Option
- Annual vs Trailing vs Rolling Returns
- How to Get Capital Gain Statement for Mutual Funds
- Mutual Funds Vs Real Estate
- Mutual Funds vs. Hedge Funds
- Target Maturity Funds
- How to Check Mutual Fund Status with Folio Number
- Oldest Mutual Funds In India
- History Of Mutual Funds In India
- How To Redeem ELSS Before 3 Years?
- Types of Index Funds
- Who Regulates Mutual Funds In India?
- Mutual Fund Vs. Share Market
- Absolute Return in Mutual Fund
- ELSS Lock in Period
- Treasury Bills Repurchase (TREPS)
- Target Date Fund
- Stock SIP vs Mutual Fund SIP
- ULIP vs ELSS
- Long Term Capital Gain Tax on Mutual Funds
- Smart Beta Funds
- Inverted Yield Curve
- Risk-Return Trade-Off
- Registrar and Transfer Agents (RTA)
- Mutual Funds Overlap
- Mutual Fund Redemption
- Mark to Market (MTM)
- Information Ratio
- Difference Between ETF and Index Fund
- Difference Between Mutual Fund and Index Fund
- Top 10 High Return Mutual Funds
- Passive Mutual Funds
- Passive Funds vs Active Funds
- Consolidated Account Statement
- Mutual Funds Minimum Investment
- What is Open Ended Mutual Fund?
- What is Closed End Mutual Fund?
- Real-Estate Mutual Funds
- How to Stop SIP?
- How to Invest in SIP
- What is a Blue Chip Fund?
- What is XIRR in Mutual Funds?
- What is a Hedge Fund?
- Tax Treatment of Long Term Capital Gains
- What is SIP?
- NAV in Mutual Funds
- Advantages of Mutual Funds
- Stocks vs Mutual Funds
- What is STP in Mutual Fund
- How Mutual Fund Works?
- What is Mutual Fund NAV?
- What are Mutual Funds?
- Mutual Fund Cut Off Time
- Mutual Fund the Best Investment Option for Conservative Investors
- Advantages and Disadvantages of Mutual Funds
- How to Choose Mutual Funds in India?
- How to Invest In Mutual Funds?
- How to Calculate NAV of Mutual Fund?
- What Is CAGR In Mutual Funds?
- AUM in Mutual Fund
- Total Expense Ratio
- What is XIRR in Mutual Funds?
- What is SWP in Mutual Fund
- How to Calculate Mutual Fund Return?
- Gold Mutual Funds
- Tax On Mutual Fund Investment
- The Top Benefits and Drawbacks of The Rupee Cost Averaging Approach
- How to Start a SIP Investment?
- What Is SIP & How does SIP Work?
- Best SIP Plans for Long Term: How and Where to Invest
- Best SIP Mutual Fund Plans
- ELSS Vs SIP
- Top Fund Managers in India
- What is NFO?
- Difference Between ETF and Mutual Fund
- ULIPs VS Mutual Funds
- Direct Vs. Regular Mutual Funds: What’s The Difference?
- ELSS vs Equity Mutual Fund
- NPS vs Mutual Fund
- Can NRIs Invest in Mutual Funds?
- Mutual Funds Categorisation In India
- Everything You Need to Know About Small-Cap Funds
- What is Public Provident Fund ?
- What is Large Cap Mutual Fund ?
- What is Index Fund ?
- What is IDCW in Mutual Fund ?
- What is Hybrid Fund?
- What is Gilt Fund ?
- What is ELSS Fund ?
- What is Debt Funds?
- What is an Asset Management Company - A Thorough Explanation
- What are Mid Cap Funds
- Liquid Funds - What are Liquid Funds?
- A Beginner's Guide to Investing in Fund of Funds Read More
Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing. For detailed disclaimer please Click here.
Frequently Asked Questions
In India, both the funds are performing well, as per past reports. But to be on the safe side it is better to check the overall price of both and then compare to decide which one is better for the investment.
You cannot say clearly which one is safe but it wholly depends upon what funds you own. The reason is stocks always avail higher risks than bonds and always deliver more returns.
ETFs and index funds are great investment options for average people, but their overall cost differs. ETFs are a cheap investment option compared to index funds in many scenarios.
For example, the HDFC NIFTY 50 ETF comes at a direct expense ratio of 0.05%, but the Index Fund variant is 0.20% for its direct variant.
There is not much difference between an ETF and an index fund, but when choosing the best investment option, you must consider the fees you must pay during buying or selling.
Regards to this, if you talk about returns, the ETF delivers slightly higher returns than index funds. Apart from that, ETFs are cheaper than index funds in varied scenarios. So, we cannot say which is better, but the final decision must be taken after considering various factors.