Index funds and ETFs

Index funds and ETFs simply copy a market index such as the Nifty 50 or Sensex, instead of a manager picking stocks. This keeps their expense ratio low.

An index fund is bought and sold through the fund house at the day's NAV, like any mutual fund, and allows SIPs. An ETF is traded on the stock exchange during market hours like a share and needs a demat account.

For funds tracking the same index, a lower expense ratio and a smaller tracking difference are better.