Index Funds & ETFs

Passive schemes tracking a stated index, held as units or on exchange.

An index fund or exchange traded fund holds the constituents of a stated index in the same proportion, without an active selection decision. Performance follows the index, less expenses and tracking difference.

Index funds are bought and sold like any other mutual fund scheme at end-of-day NAV. ETFs trade on the exchange through a demat account, where the market price can differ from the underlying NAV.

Key features

• Broad market, sectoral, thematic, international and factor-based indices
• Generally lower expense ratios than actively managed equivalents
• Tracking error and tracking difference disclosed by the fund house
• ETFs require a demat and trading account; index funds do not
• ETF market price can trade at a premium or discount to NAV
• Gold and silver ETFs available for commodity exposure