What's the difference between an index fund and an ETF?

ETFs
Answers
Sort By:
Most Helpful
5 days ago
100% of people found this answer helpful

An index fund is a type of mutual fund that is designed to track a particular market “index”, whether it is the S&P 500, Russell 2000, or MSCI EAFE; hence the name “index fund”. Due to the nature of their design (mimicking a specific market index), index funds would be considered a passive management strategy, which have a lower cost structure than typical mutual funds. Typical mutual funds are actively managed, and are built to outperform a particular benchmark or address a specific investment strategy.

An Exchange Traded Fund (ETF) would also be considered a passive investment strategy. ETFs can track an index, an industry, a commodity, a particular investment strategy, ect. They are listed on market exchanges just like individual stocks; which allow them to be bought and sold like a stock. Their prices can go up and down like stock prices throughout the day, and they provide liquidity like highly traded securities.

5 days ago
March 2015
4 days ago
4 days ago