Know the Difference Between (ETF vs Index fund)
What are Index Funds?
Index funds aim to just replicate the performance of an index by replicating your portfolio of the index. An index fund is typically suitable for long-term investors with your low-risk profile.
Index funds are mutual funds that invest in stock market indices that are operated by reputable third-party index providers such as Nifty indices (NSE) or Asia Index Private Limited (BSE). Equity indexes that are commonly followed include the BSE Sensex and the NSE NIFTY 50.
Simply put, index funds motive to replicate an index’s results by simulating the index’s portfolio. Long-term investors with a low risk profile should consider an index fund.
What are Exchange Traded Funds (ETFs)
ETFs are mutual funds that can be exchanged like stocks on the stock exchange. ETFs, like Index Funds, are designed to monitor the performance of a specific index. During the trading day, you can simply buy and sell ETF units.
Today’s ETFs cover all major asset groups, including equities, fixed income, and even commodities such as gold.
ETFs are ideal for investors who want to get a broad view of an index with a limited investment.
ETFs, unlike index funds, have low expense ratios and, as a result, are low-cost investments. ETFs are also more versatile and liquid than index funds because they can be exchanged at any time of day.