ETFs Or Index Funds: Which Should You Choose?

Both ETFs and index funds are passive products that track an underlying index. We assess the pros and cons of both to help you make the right choice.

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In the previous articles of this series, we talked about exchange-traded funds, or ETFs, and how to choose them. ETFs track a particular index, such as the Sensex or the Nifty 50, and trade on a stock exchange, just like stocks. Because they comprise a fixed set of stocks, investing via ETFs is also called ‘passive’ investing. Apart from ETFs, index funds are also passive products that track a particular index and aim to provide returns in line with those of the underlying index. So, what’s the difference between the two? Which should you prefer? Here’s some help.