ETF (Exchange Traded Fund) — Mutual Fund Term Explained

Like an index fund but traded on a stock exchange at real-time prices. Requires a demat account. Slightly cheaper than index funds.

An ETF tracks an index but is listed and traded on a stock exchange. You buy and sell at live prices during market hours, unlike mutual fund units which transact at end-of-day NAV.

For SIP investors, index funds are more convenient. For lump sum investors with a demat account, ETFs are marginally cheaper.

Related terms

• Index Fund — A passively managed fund replicating a market index like Nifty 50. Ultra-low cost (0.05%). Most active funds underperform over 10+ years.
• Tracking Error — For index funds: how closely the fund tracks its benchmark. Lower is better — high tracking error means the fund deviates from the index.

Browse the full mutual fund glossary, or see this concept in action in the fund screener.