What is the difference between index funds and ETFs?

1.Index funds are openended mutual fund schemes while ETFs are funds traded on the stock exchanges.

2.Index funds can be invested in the physical format or in the demat format whereas ETFs require a demat account for investment.

3.SIP investments are possible in index funds but not in ETFs.

4.An index fund gets an NAV at the end of the day, but the price of an ETF changes in real time with the market conditions.

5.Index funds have higher expense ratios as compared to ETFs, but ETFs also have a transaction cost attached both at the time of buying and selling.

Content on this page is courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.

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