Updated on March 15, 2023
Index ETFs (Exchange Traded Funds) are a pool of securities like any mutual fund, the key difference however is that the composition of the fund is in line with the benchmark that the fund follows or tracks. The returns of these funds are therefore dependent on the performance of the benchmark. The risk of investment in Index ETFs is significantly lower than investing in any active fund along with the benefit of lower expense ratio. Additional benefit of Index ETFs is their tradability on the stock exchanges similar to individual stocks making them relatively more liquid as compared to other mutual funds. Similar to any other mutual funds, Index ETFs are also a pool of securities which allows the investors to get exposure to diverse class of assets belonging to different sectors under the roof of a single fund.