Mutual funds can hold stocks, bonds, commodities, and other investment types. What Is an Index Fund?Īn index fund is simply a mutual fund designed to track the performance, less fees, of an underlying benchmark index.Ī mutual fund is also a pooled investment security, similar to ETFs. The creation/redemption mechanism in an ETF keeps the price of the shares very close to the true net asset value of the component securities in the underlying ETF portfolio. Also like stocks, the ETF trading price is determined by the buyers and sellers in the market. Like stocks, ETFs trade intra-day on an exchange.
Index ETFs are simply exchange-traded funds that seek to passively track the performance of a benchmark index, such as the S&P 500.Īn exchange-traded fund, or ETF, is a pooled investment security that works as a hybrid of stocks and index-based mutual funds. Jirapong Manustrong/iStock via Getty Images What Is an Index ETF?
