Question

What is the difference between a Market Index ETF and a Market Index Mutual Fund?

Answer 1

Market Index ETF- A Market index ETF or Exchange-traded funds is a collection of securities like stocks, bonds, commodities and it tracks a particular Index.

Mutual Fund - Mutual fund basically pools money from several investors and invest them in stocks or bonds. Mutual Funds are managed by professional Fund Managers. In a Market Index Mutual fund, the portfolio (collection of stocks) are constructed in such a way that it matches that market Index.

While there are many similarities between an ETF and a mutual fund, there also lies many differences between them. Some of the basic differences between a Market Index ETF and a Market Index Mutual Fund are:

1. ETFs trade Intra-day like normal stocks while for mutual funds trading takes place at the end of the day

2. Stock orders are possible in case of an Index ETF, this means that investors have the flexibility to choose the price at which they want their trade to get executed while stock orders cannot be made with mutual funds