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1. Shard Calculation

Query:

Response:

Calculated Shard: 93 (from laksa156)

2. Crawled Status Check

Query:

curl -X POST \
  'http://laksa093.int.ahrefs:8124/' \
  -H 'Content-Type: text/plain' \
  -H 'X-ClickHouse-Database: crawler3' \
  -H 'Authorization: Basic YXBpOg==' \
  -d 'SELECT getAhrefsURLFromUnparsed(src_unparsed) AS found_url, ifNull(toUnixTimestamp(download_stamp), 0) AS crawl_time, ifNull(toUnixTimestamp(props_url_first_seen), 0) AS first_indexed_time, download_http_code AS http_code, src_unparsed AS src_unparsed, src_root_hash AS src_root_hash, history_drop_reason AS history_drop_reason, meta_title AS meta_title, meta_descriptions AS meta_descriptions, attrs_boilerpipe_text AS attrs_boilerpipe_text, attrs_markdown AS attrs_markdown, attrs_readable_markdown AS attrs_readable_markdown, meta_canonical AS meta_canonical FROM crawler3.page_info_local FINAL PREWHERE (src_root_hash, src_unparsed) IN ((getAhrefsRootHashFromUnparsed(getAhrefsUnparsedNoserviceFromURL(\'https://www.fidelity.com/learning-center/smart-money/etf-vs-index-fund\')), getAhrefsUnparsedNoserviceFromURL(\'https://www.fidelity.com/learning-center/smart-money/etf-vs-index-fund\'))) FORMAT JSONEachRow'

Response:

{"found_url":"https:\/\/www.fidelity.com\/learning-center\/smart-money\/etf-vs-index-fund","crawl_time":1775643409,"first_indexed_time":1719265836,"http_code":200,"src_unparsed":"com,fidelity!www,\/learning-center\/smart-money\/etf-vs-index-fund s443","src_root_hash":"17952695050214760493","history_drop_reason":null,"meta_title":"ETF vs. index fund: What’s the difference? | Fidelity","meta_descriptions":["How are ETFs and index funds alike and how are they different? Read on to learn what they have in common and don't."],"attrs_boilerpipe_text":"ETF vs. index fund: Which is right for you?\nLearn what's different about these 2 funds.\nKey takeaways\nETFs and index funds pool many investors' money to create large, professionally managed portfolios.\nBoth fund types may help simplify investing, aim to keep expense ratios low, and strive to reduce risk through diversification.\nETFs can be bought and sold throughout the trading day, which may be beneficial for active investors. Index mutual funds can be bought and sold only at the end of the day.\nIndex funds and exchange-traded funds (ETFs) can be 2 simple ways to invest. They're alike in that they both pool many investors' money into a professionally managed portfolio that could contain stocks, bonds, and other assets. But there are some technical differences between ETFs and certain index funds. Here's how to tell which may be right for you.\nETF vs. index fund: Key differences\nThe differences between an \nETF\n and an \nindex fund\n depend on how you define each of those terms. In this article, we're considering an ETF to be a passively managed fund that attempts to mimic the performance of an index, like the S&P 500\n®\n. And we're considering an index fund to be a \nmutual fund\n that also tracks an index. Really, an index fund could be a mutual fund or an ETF. An increasing number of ETFs use the same actively managed techniques that many mutual funds do, and approximately half of all ETFs today are actively managed. What follows are the differences between an ETF and an index mutual fund.\nTrading access\nOne major difference between ETFs and index mutual funds is when they can be traded. You can buy and sell ETFs at any time throughout the trading day, just as you can with stocks. Also like stocks, an ETF's price can change during the day based on the performance of the fund's investments.\nOn the other hand, you can buy or sell shares in index mutual funds only once at the close of each trading day for the price set at 4 p.m. ET. You can put in an order at any time, but it will only go through at the end of the day. At that point, the fund manager will also release the updated index mutual fund share price based on the day's market results.\nInvestment goals\nWhether it's an ETF or a mutual fund, the goal of any index fund is to mimic the results of a specific market index, like the S&P 500\n®\n. According to Fidelity analysis of Bloomberg data, nearly half of all ETFs are passively managed,\n1\nmeaning the assets within the fund simply imitate the index it's tracking. However, active ETFs may have different goals, like ones managed by a broker who tries to pick the best-performing stocks within the S&P 500\n®\nto earn a potentially higher return.\nThere's more transparency with ETFs, which typically offer daily portfolio holding disclosures. Index mutual funds only release details on specific investments monthly or quarterly.\nFees\nPassive ETFs and mutual funds tend to be low-cost investments. Each charges shareholders an annual fee called an expense ratio. Expense ratio is a fund's total annual operating expenses divided by its net assets and can be found in the fund's most recent prospectus. The actual cost to maintain a fund ultimately depends on which company and fund you choose. The Investment Company Institute\n®\nfound index mutual funds' expense ratios were 0.05% per year on average in 2024, a rate that's been declining for years.\n2\nIndex equity ETFs' asset-weighted average expense ratio for 2024 was higher, at 0.14%.\n3\nBut there are multiple S&P 500\n®\nETFs that charge 0.03% or less per year.\n4\nBe sure to check expense ratios before investing because the less you pay in fees each year, the more money that stays in your portfolio. (Psst … Fidelity offers\nindex funds with 0% expense ratios.\n)\nBut expense ratios aren't the only fees that show ETFs vs. index funds' differences. With ETFs, you could owe a trading commission, a flat fee each time you buy or sell, depending on your broker (the investment company handling your trades). Some brokers don't charge trading commissions on ETFs though. Other fees and expenses applicable to continued investment are described in the fund's current prospectus. With index mutual funds, brokers could charge a commission and\/or a load fee for buying and selling. The load fee could be a flat fee or a percentage of your transaction. Still, there are no-load index mutual funds that don't charge this fee. Other fees and expenses applicable to continued investment are described in the fund's current prospectus.\nWhen you buy and sell ETFs during the trading day, you might also owe something called a bid-ask spread. This means you pay more than the market price to buy and receive less than the market price to sell to compensate the broker for processing your trade. The spread is usually smaller for popular ETFs with high trading volume. Index mutual funds don't charge this spread.\nTaxes\nAnother cost to consider is\ncapital gains taxes\n, which you're on the hook for if you sell shares of an ETF or an index mutual fund for more than the amount you paid for them.\nIndex mutual funds could charge an extra tax. If another investor cashes out, the fund manager has to sell portfolio investments to get the investor this cash, owing taxes on any investments sold for a gain. The fund then passes on these taxes to the remaining investors. In other words, you might owe capital gains taxes in a year you haven't sold any index fund shares yourself. ETFs don't owe taxes when investors cash out, making ETFs potentially more tax-efficient than mutual funds.\nMinimum investment\nETFs generally don't require a minimum initial investment. You can find\nindex mutual funds with $0 minimum investments\n, but many funds do set minimums that run from as little as $1 to $3,000 to buy in.\nETFs are usually not an investment option through workplace retirement plans, like a 401(k). If you want to invest through a workplace plan, you might need to stick with index funds and other mutual funds, depending on what your employer offers.\nAutomation\nSome index fund managers offer regular, automatic purchases of their mutual funds, which isn't an option with ETFs.\nIndex fund vs. ETF: Major similarities\nDespite the technical differences between index funds and ETFs, they're similar in many ways.\nSimple to manage\nWith both index funds and ETFs, you make just one purchase to buy into a large professionally managed portfolio. You don't need to buy all of the components of the portfolio individually.\nReduced risk through diversification\nDiversification is the practice of spreading your investments around so that your exposure to any one type of asset is limited. It's designed to help reduce the volatility of your portfolio over time. Both ETFs and index funds allow you to spread your money across a portfolio with dozens, if not hundreds, of stocks and other investments, so you can get that diversification.\nStrong historical long-term returns\nIndex funds and passive ETFs aim to match the return of the market or a portion of it. This passive strategy has the potential for long-term growth, considering the historical performance of the S&P 500\n®\n, which has shown an average return of around 10% a year since 1928. But it's important to remember that past performance doesn't guarantee future results.\n5\nWhile active ETFs and active mutual funds try to earn higher returns than the market, only about 1 out of 4 active funds outearned the market over the past 10 years.\n6\nStill, some\nactive funds outperform others\n.\nShould you invest with ETFs or mutual funds?\nWhen choosing what to invest in, focus on the goal of the fund itself and how that aligns with your personal goals. Here are some questions to ask yourself before investing in an\nETF vs. index mutual fund\n.\nDo you plan on trading often?\nETFs are generally better for frequent trading because you can buy and sell shares throughout the trading day. Index mutual funds only let you buy and sell at the very end of each trading day. ETFs typically disclose portfolio holdings on a daily basis, and the market price of an ETF can be tracked intraday during trading hours when the market is open, as with any other stock. Index mutual funds only release this information after 4 p.m. daily. Lastly, with ETFs, you can buy on margin, a strategy where you borrow money from a broker or bank to invest, and use more advanced order types like stop-limit, when an order is executed at a specified price, and short-sale orders, when an investor borrows securities from a broker, sells them, and then expects to buy them back at a lower price. You don't have these options with index mutual funds.\nDo you plan on investing long-term?\nIndex mutual funds could be right for investors in it for the long haul. That's because long-term investors aren't looking to buy or sell throughout the trading day and don't have to worry about minimizing more active plans' transaction costs, though fees vary depending on the fund and who's managing it.\nAre you in a higher tax bracket?\nIf you invest outside of a retirement plan, ETFs could be a way to reduce your tax liability. Unlike index mutual funds, ETFs don't trigger capital gains taxes when other investors cash out. In general, both types of passive funds can be good\nstrategies for reducing taxes on your investments\n.\nHow to buy ETFs and index funds\nThe process of investing in ETFs and index funds is similar. First, you need an online investment account with a broker. There are a few factors to consider as you\nfigure out which broker to use\n, such as what their overall fee structure is and how user-friendly their investment platform is. It's also a good idea to research how diverse their selection is of index funds and ETFs. Some companies offer a wide variety of both, while others are more limited.\nOnce you have your brokerage account open, you can search through the funds available. Ideally, the platform will detail each fund's goals, fees, and past investment performance. From there you can decide whether the index funds or ETFs are a better fit and then choose specific funds to invest in.","attrs_markdown":"[Skip to main content](https:\/\/www.fidelity.com\/learning-center\/smart-money\/etf-vs-index-fund#navSkipToContent)\n\n[Fidelity.com Home](https:\/\/www.fidelity.com\/)\n\n[Log in](https:\/\/digital.fidelity.com\/prgw\/digital\/login\/full-page)\n\n- [Accounts & Trade]()\n  - [Portfolio](https:\/\/digital.fidelity.com\/prgw\/digital\/login\/full-page?AuthRedUrl=https:\/\/digital.fidelity.com\/ftgw\/digital\/portfolio\/summary)\n  - [Account Positions](https:\/\/digital.fidelity.com\/ftgw\/digital\/portfolio\/positions)\n  - [Trade](https:\/\/digital.fidelity.com\/ftgw\/digital\/trade-equity\/index\/orderEntry)\n  - [Fidelity Trader+ Web](https:\/\/digital.fidelity.com\/ftgw\/digital\/trader-dashboard)\n  - [Fidelity Trader+](https:\/\/www.fidelity.com\/trading\/trading-platforms)\n  - [Transfers](https:\/\/www.fidelity.com\/customer-service\/money-movement)\n  - 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[Documents](https:\/\/digital.fidelity.com\/ftgw\/digital\/portfolio\/documents)\n  - [Tax Forms & Information](https:\/\/www.fidelity.com\/tax-information\/overview)\n  - [Retirement Distributions](https:\/\/digital.fidelity.com\/ftgw\/digital\/mrdhub)\n  - [Refer a Friend](https:\/\/www.fidelity.com\/customer-service\/friendsandfamily3a)\n- [Investing]()\n  - [Self Directed Investing](https:\/\/www.fidelity.com\/investing\/trading)\n  - [Advanced Trading](https:\/\/www.fidelity.com\/investing\/advanced-trading)\n  - [Investing for a Child](https:\/\/www.fidelity.com\/investing\/investing-for-kids)\n  - [Managing Cash & Credit](https:\/\/www.fidelity.com\/investing\/manage-cash-credit-lending)\n  - [Investment Accounts & Products](https:\/\/www.fidelity.com\/investing\/investment-accounts)\n  - [Investing & Trading Education](https:\/\/www.fidelity.com\/learning-center\/personal-finance\/investing-trading-education)\n- [Retirement]()\n  - [Retirement Planning](https:\/\/www.fidelity.com\/retirement\/retirement-planning)\n  - [401(k) Rollovers & IRA Transfers](https:\/\/www.fidelity.com\/retirement\/401k-rollover)\n  - [Retirement Accounts](https:\/\/www.fidelity.com\/retirement\/retirement-accounts)\n  - [Retirement Education](https:\/\/www.fidelity.com\/learning-center\/personal-finance\/retirement-education)\n- [Wealth Management]()\n  - [Wealth Management Offerings](https:\/\/www.fidelity.com\/wealth\/wealth-management-offerings)\n  - [Financial Advisors](https:\/\/www.fidelity.com\/wealth\/financial-advisors)\n  - [Financial Planning](https:\/\/www.fidelity.com\/wealth\/financial-planning)\n  - [Investment Management](https:\/\/www.fidelity.com\/wealth\/investment-management)\n  - [Wealth Management Insights](https:\/\/www.fidelity.com\/learning-center\/wealth-management-insights)\n- [News & Research]()\n  - [News](https:\/\/www.fidelity.com\/news\/overview)\n  - [Wealth Management Insights](https:\/\/www.fidelity.com\/learning-center\/wealth-management-insights)\n  - [Watchlist](https:\/\/digital.fidelity.com\/ftgw\/digital\/watwebex)\n  - [Alerts](https:\/\/alertable.fidelity.com\/ftgw\/digital\/alerts)\n  - [Stocks, ETFs, Crypto](https:\/\/digital.fidelity.com\/prgw\/digital\/research\/src)\n  - [Mutual Funds](https:\/\/fundresearch.fidelity.com\/fund-screener)\n  - [Fixed Income, Bonds & CDs](https:\/\/fixedincome.fidelity.com\/ftgw\/fi\/FILanding)\n  - [Options](https:\/\/digital.fidelity.com\/ftgw\/digital\/options-home\/)\n  - [IPOs](https:\/\/brokerage.fidelity.com\/ftgw\/brkg\/ipo\/calendar)\n  - [Annuities](https:\/\/fundresearch.fidelity.com\/fund-screener\/annuities\/)\n  - [Learn](https:\/\/www.fidelity.com\/learning-center\/overview)\n\n## Learn\n- [Learn](https:\/\/www.fidelity.com\/learning-center\/overview)\n- [Favorites](https:\/\/www.fidelity.com\/learning-center\/favorites)\n- Topics\n  - Financial essentials\n    - [Saving and budgeting money](https:\/\/www.fidelity.com\/learning-center\/personal-finance\/saving-and-budgeting-money \"Saving and budgeting money\")\n    - [Managing debt](https:\/\/www.fidelity.com\/learning-center\/personal-finance\/managing-debt \"Managing debt\")\n    - [Saving for retirement](https:\/\/www.fidelity.com\/learning-center\/personal-finance\/retirement\/saving-for-retirement \"Saving for retirement\")\n    - [Working and income](https:\/\/www.fidelity.com\/learning-center\/personal-finance\/working-and-income \"Working and income\")\n    - [Managing health care](https:\/\/www.fidelity.com\/learning-center\/personal-finance\/managing-health-care \"Managing health care\")\n    - [Talking to family about money](https:\/\/www.fidelity.com\/learning-center\/personal-finance\/talking-to-family-about-money \"Talking to family about money\")\n    - [Personal finance for students](https:\/\/www.fidelity.com\/learning-center\/personal-finance\/personal-finance-for-students \"Personal finance for students\")\n    - [Managing taxes](https:\/\/www.fidelity.com\/learning-center\/personal-finance\/managing-taxes\/managing-taxes \"Managing taxes\")\n    - [Managing estate planning](https:\/\/www.fidelity.com\/learning-center\/personal-finance\/managing-estate-planning \"Managing estate planning\")\n    - [Making charitable donations](https:\/\/www.fidelity.com\/learning-center\/personal-finance\/charitable-giving\/making-charitable-donations \"Making charitable donations\")\n  - Life events\n    - [Changing jobs](https:\/\/www.fidelity.com\/learning-center\/life-events\/career-planning \"Changing jobs\")\n    - [Planning for college](https:\/\/www.fidelity.com\/learning-center\/life-events\/prepare-for-college \"Planning for college\")\n    - [Getting divorced](https:\/\/www.fidelity.com\/learning-center\/life-events\/getting-divorced \"Getting divorced\")\n    - [Becoming a parent](https:\/\/www.fidelity.com\/learning-center\/life-events\/parenting \"Becoming a parent\")\n    - [Caring for aging loved ones](https:\/\/www.fidelity.com\/learning-center\/life-events\/caring-for-the-aging \"Caring for aging loved ones\")\n    - [Marriage and partnering](https:\/\/www.fidelity.com\/learning-center\/life-events\/marriage \"Marriage and partnering\")\n    - [Buying or selling a house](https:\/\/www.fidelity.com\/learning-center\/life-events\/selling-and-buying-house \"Buying or selling a house\")\n    - [Retiring](https:\/\/www.fidelity.com\/learning-center\/personal-finance\/retirement\/planning-your-retirement \"Retiring\")\n    - [Losing a loved one](https:\/\/www.fidelity.com\/learning-center\/life-events\/loss-of-loved-one \"Losing a loved one\")\n    - [Making a major purchase](https:\/\/www.fidelity.com\/learning-center\/life-events\/major-purchase \"Making a major purchase&#9;\")\n    - [Experiencing illness or injury](https:\/\/www.fidelity.com\/learning-center\/life-events\/injury-and-illness \"Experiencing illness or injury\")\n    - [Disabilities and special needs](https:\/\/www.fidelity.com\/learning-center\/life-events\/disabilities-and-special-needs \"Disabilities and special needs\")\n    - [Aging well](https:\/\/www.fidelity.com\/learning-center\/life-events\/aging-well \"Aging well\")\n    - [Becoming self-employed](https:\/\/www.fidelity.com\/learning-center\/life-events\/how-to-become-self-employed \"Becoming self-employed\")\n  - Investing and trading\n    - [Investing for beginners](https:\/\/www.fidelity.com\/learning-center\/trading-investing\/investing-for-beginners \"Investing for beginners\")\n    - [Trading for beginners](https:\/\/www.fidelity.com\/learning-center\/trading-investing\/trading-for-beginners \"Trading for beginners\")\n    - [Crypto basics](https:\/\/www.fidelity.com\/learning-center\/trading-investing\/crypto\/crypto-for-beginners \"Crypto basics\")\n    - [Crypto: Beyond the basics](https:\/\/www.fidelity.com\/learning-center\/trading-investing\/crypto\/crypto-advanced \"Crypto: Beyond the basics\")\n    - [Alternative investing](https:\/\/www.fidelity.com\/learning-center\/trading-investing\/alternative-investing \"Alternative investing\")\n    - [Exploring stocks and sectors](https:\/\/www.fidelity.com\/learning-center\/trading-investing\/finding-stocks-and-sector-ideas \"Exploring stocks and sectors\")\n    - [Investing for income](https:\/\/www.fidelity.com\/learning-center\/trading-investing\/investing-for-income \"Investing for income\")\n    - [Analyzing stock fundamentals](https:\/\/www.fidelity.com\/learning-center\/trading-investing\/fundamental-analysis\/analyzing-stock-fundamentals \"Analyzing stock fundamentals\")\n    - [Using technical analysis](https:\/\/www.fidelity.com\/learning-center\/trading-investing\/technical-analysis\/using-technical-analysis \"Using technical analysis\")\n  - Investment products\n    - [ETFs](https:\/\/www.fidelity.com\/learning-center\/investment-products\/etf\/etfs \"ETFs\")\n    - [Mutual funds](https:\/\/www.fidelity.com\/learning-center\/investment-products\/mutual-funds\/mutual-funds \"Mutual funds \")\n    - [Stocks](https:\/\/www.fidelity.com\/learning-center\/investment-products\/stocks\/stocks \"Stocks\")\n    - [Fixed income, bonds, CDs](https:\/\/www.fidelity.com\/learning-center\/investment-products\/fixed-income-bonds\/fixed-income-bonds-cds \"Fixed income, bonds, CDs\")\n    - [Annuities](https:\/\/www.fidelity.com\/learning-center\/investment-products\/annuities \"Annuities\")\n    - [Closed-end funds](https:\/\/www.fidelity.com\/learning-center\/investment-products\/closed-end-funds\/closed-end-funds \"Closed-end funds\")\n  - Advanced trading\n    - [Using margin](https:\/\/www.fidelity.com\/learning-center\/trading-investing\/using-margin \"Using margin\")\n    - [Options trading basics](https:\/\/www.fidelity.com\/learning-center\/investment-products\/options\/options-for-beginners \"Options trading basics\")\n    - [Options: Beyond the basics](https:\/\/www.fidelity.com\/learning-center\/investment-products\/options\/options \"Options: Beyond the basics\")\n    - [Advanced trading strategies](https:\/\/www.fidelity.com\/learning-center\/trading-investing\/more-trading-strategies \"Advanced trading strategies\")\n    - [Using Fidelity Trader+](https:\/\/www.fidelity.com\/learning-center\/trading-investing\/trading-platforms\/using-trader-plus \"Using Fidelity Trader+\")\n    - [Options Strategy Guide](https:\/\/www.fidelity.com\/learning-center\/investment-products\/options\/options-strategy-guide\/overview \"Options Strategy Guide\")\n    - [Technical Indicator Guide](https:\/\/www.fidelity.com\/learning-center\/trading-investing\/technical-analysis\/technical-indicator-guide\/overview \"Technical Indicator Guide\")\n  - [Latest Market Insights](https:\/\/www.fidelity.com\/viewpoints\/market-and-economic-insights\/market-volatility-overview \"Latest Market Insights\")\n  - [Viewpoints: Expert insights](https:\/\/www.fidelity.com\/learning-center\/viewpoints \"Viewpoints: Expert insights\")\n  - [Smart Money: Tips and tactics](https:\/\/www.fidelity.com\/learning-center\/smart-money \"Smart Money: Tips and tactics\")\n  - [Money Unscripted](https:\/\/www.fidelity.com\/learning-center\/money-unscripted \"Money Unscripted\")\n  - [The Trading Post](https:\/\/www.fidelity.com\/learning-center\/trading-post \"The Trading Post\")\n  - [Women Talk Money](https:\/\/www.fidelity.com\/learning-center\/women-talk-money \"Women Talk Money\")\n  - [Wealth Management Insights](https:\/\/www.fidelity.com\/learning-center\/wealth-management-insights \"Wealth Management Insights\")\n- Events\n  - [Upcoming events](https:\/\/fidelityevents.com\/allevents\/special \"Upcoming events\")\n  - [On-demand webinars](https:\/\/www.fidelity.com\/learning-center\/events\/investing-webinars \"On-demand webinars\")\n  - [Market briefings](https:\/\/fidelityevents.com\/allevents\/filtered?hubFilter=tags|Coaching,Market%20Analysis#hub \"Market briefings\")\n  - [Market Sense](https:\/\/www.fidelity.com\/learning-center\/live-pi \"Market Sense\")\n  - [Trading Strategy Desk® coaching](https:\/\/www.fidelity.com\/learning-center\/events\/coaching-sessions \"Trading Strategy Desk® coaching\")\n  - [Trading Strategy Desk® classes](https:\/\/www.fidelity.com\/learning-center\/events\/virtual-classrooms \"Trading Strategy Desk® classes\")\n- Search\n\nJune 13, 2025\n\n![Estimate Time](https:\/\/www.fidelity.com\/bin-public\/600_Fidelity_Com_English\/images\/article\/time-clock-circle.svg)8 min\n\nSave ![](https:\/\/www.fidelity.com\/bin-public\/600_Fidelity_Com_English\/images\/article\/Bookmark.svg) ![](https:\/\/www.fidelity.com\/bin-public\/600_Fidelity_Com_English\/images\/article\/save-success.svg)\n\nClose Popover\n\n***\nGreat, you have saved this article to you My Learn Profile page.\n\nShare ![Share](https:\/\/www.fidelity.com\/bin-public\/600_Fidelity_Com_English\/images\/article\/share.svg)\n\nClose Popover\n\n***\nFidelity Investments\n\nClicking a link will open a new window.\n\n- [Facebook](https:\/\/www.fidelity.com\/learning-center\/smart-money\/etf-vs-index-fund#facebook)\n- [Twitter](https:\/\/www.fidelity.com\/learning-center\/smart-money\/etf-vs-index-fund#twitter)\n- [LinkedIn](https:\/\/www.fidelity.com\/learning-center\/smart-money\/etf-vs-index-fund#linkedin)\n\n[Print ![Print](https:\/\/www.fidelity.com\/bin-public\/600_Fidelity_Com_English\/images\/article\/Print.svg)](https:\/\/www.fidelity.com\/learning-center\/smart-money\/etf-vs-index-fund#print)\n\n# ETF vs. index fund: Which is right for you?\nLearn what's different about these 2 funds.\n\nFidelity Viewpoints\n\n![](https:\/\/www.fidelity.com\/bin-public\/600_Fidelity_Com_English\/images\/learning-center\/heros\/etf-vs-index-fund_708716244_banner.png)\n\n### Key takeaways\n- ETFs and index funds pool many investors' money to create large, professionally managed portfolios.\n- Both fund types may help simplify investing, aim to keep expense ratios low, and strive to reduce risk through diversification.\n- ETFs can be bought and sold throughout the trading day, which may be beneficial for active investors. Index mutual funds can be bought and sold only at the end of the day.\n\nIndex funds and exchange-traded funds (ETFs) can be 2 simple ways to invest. They're alike in that they both pool many investors' money into a professionally managed portfolio that could contain stocks, bonds, and other assets. But there are some technical differences between ETFs and certain index funds. Here's how to tell which may be right for you.\n\n### ETF vs. index fund: Key differences\nThe differences between an [ETF](https:\/\/www.fidelity.com\/learning-center\/investment-products\/etf\/what-are-etfs) and an [index fund](https:\/\/www.fidelity.com\/learning-center\/smart-money\/what-is-an-index-fund) depend on how you define each of those terms. In this article, we're considering an ETF to be a passively managed fund that attempts to mimic the performance of an index, like the S\\&P 500®. And we're considering an index fund to be a [mutual fund](https:\/\/www.fidelity.com\/learning-center\/investment-products\/mutual-funds\/what-are-mutual-funds) that also tracks an index. Really, an index fund could be a mutual fund or an ETF. An increasing number of ETFs use the same actively managed techniques that many mutual funds do, and approximately half of all ETFs today are actively managed. What follows are the differences between an ETF and an index mutual fund.\n\n**Trading access**\n\nOne major difference between ETFs and index mutual funds is when they can be traded. You can buy and sell ETFs at any time throughout the trading day, just as you can with stocks. Also like stocks, an ETF's price can change during the day based on the performance of the fund's investments.\n\nOn the other hand, you can buy or sell shares in index mutual funds only once at the close of each trading day for the price set at 4 p.m. ET. You can put in an order at any time, but it will only go through at the end of the day. At that point, the fund manager will also release the updated index mutual fund share price based on the day's market results.\n\n**Investment goals**\n\nWhether it's an ETF or a mutual fund, the goal of any index fund is to mimic the results of a specific market index, like the S\\&P 500®. According to Fidelity analysis of Bloomberg data, nearly half of all ETFs are passively managed,1 meaning the assets within the fund simply imitate the index it's tracking. However, active ETFs may have different goals, like ones managed by a broker who tries to pick the best-performing stocks within the S\\&P 500® to earn a potentially higher return.\n\nThere's more transparency with ETFs, which typically offer daily portfolio holding disclosures. Index mutual funds only release details on specific investments monthly or quarterly.\n\n**Fees**\n\nPassive ETFs and mutual funds tend to be low-cost investments. Each charges shareholders an annual fee called an expense ratio. Expense ratio is a fund's total annual operating expenses divided by its net assets and can be found in the fund's most recent prospectus. The actual cost to maintain a fund ultimately depends on which company and fund you choose. The Investment Company Institute® found index mutual funds' expense ratios were 0.05% per year on average in 2024, a rate that's been declining for years.2 Index equity ETFs' asset-weighted average expense ratio for 2024 was higher, at 0.14%.3 But there are multiple S\\&P 500® ETFs that charge 0.03% or less per year.4 Be sure to check expense ratios before investing because the less you pay in fees each year, the more money that stays in your portfolio. (Psst … Fidelity offers [index funds with 0% expense ratios.](https:\/\/www.fidelity.com\/mutual-funds\/investing-ideas\/index-funds \"index funds with 0% expense ratios.\"))\n\nBut expense ratios aren't the only fees that show ETFs vs. index funds' differences. With ETFs, you could owe a trading commission, a flat fee each time you buy or sell, depending on your broker (the investment company handling your trades). Some brokers don't charge trading commissions on ETFs though. Other fees and expenses applicable to continued investment are described in the fund's current prospectus. With index mutual funds, brokers could charge a commission and\/or a load fee for buying and selling. The load fee could be a flat fee or a percentage of your transaction. Still, there are no-load index mutual funds that don't charge this fee. Other fees and expenses applicable to continued investment are described in the fund's current prospectus.\n\nWhen you buy and sell ETFs during the trading day, you might also owe something called a bid-ask spread. This means you pay more than the market price to buy and receive less than the market price to sell to compensate the broker for processing your trade. The spread is usually smaller for popular ETFs with high trading volume. Index mutual funds don't charge this spread.\n\n**Taxes**\n\nAnother cost to consider is [capital gains taxes](https:\/\/www.fidelity.com\/learning-center\/smart-money\/capital-gains-tax-rates), which you're on the hook for if you sell shares of an ETF or an index mutual fund for more than the amount you paid for them.\n\nIndex mutual funds could charge an extra tax. If another investor cashes out, the fund manager has to sell portfolio investments to get the investor this cash, owing taxes on any investments sold for a gain. The fund then passes on these taxes to the remaining investors. In other words, you might owe capital gains taxes in a year you haven't sold any index fund shares yourself. ETFs don't owe taxes when investors cash out, making ETFs potentially more tax-efficient than mutual funds.\n\n**Minimum investment**\n\nETFs generally don't require a minimum initial investment. You can find [index mutual funds with \\$0 minimum investments](https:\/\/www.fidelity.com\/mutual-funds\/investing-ideas\/index-funds \"index mutual funds with $0 minimum investments\"), but many funds do set minimums that run from as little as \\$1 to \\$3,000 to buy in.\n\nETFs are usually not an investment option through workplace retirement plans, like a 401(k). If you want to invest through a workplace plan, you might need to stick with index funds and other mutual funds, depending on what your employer offers.\n\n**Automation**\n\nSome index fund managers offer regular, automatic purchases of their mutual funds, which isn't an option with ETFs.\n\n### Index fund vs. ETF: Major similarities\nDespite the technical differences between index funds and ETFs, they're similar in many ways.\n\n**Simple to manage**\n\nWith both index funds and ETFs, you make just one purchase to buy into a large professionally managed portfolio. You don't need to buy all of the components of the portfolio individually.\n\n**Reduced risk through diversification**\n\nDiversification is the practice of spreading your investments around so that your exposure to any one type of asset is limited. It's designed to help reduce the volatility of your portfolio over time. Both ETFs and index funds allow you to spread your money across a portfolio with dozens, if not hundreds, of stocks and other investments, so you can get that diversification.\n\n**Strong historical long-term returns**\n\nIndex funds and passive ETFs aim to match the return of the market or a portion of it. This passive strategy has the potential for long-term growth, considering the historical performance of the S\\&P 500®, which has shown an average return of around 10% a year since 1928. But it's important to remember that past performance doesn't guarantee future results.5 While active ETFs and active mutual funds try to earn higher returns than the market, only about 1 out of 4 active funds outearned the market over the past 10 years.6 Still, some [active funds outperform others](https:\/\/www.fidelity.com\/mutual-funds\/investing-ideas\/beat-the-benchmark \"active funds outperform others\").\n\n### Should you invest with ETFs or mutual funds?\nWhen choosing what to invest in, focus on the goal of the fund itself and how that aligns with your personal goals. Here are some questions to ask yourself before investing in an [ETF vs. index mutual fund](https:\/\/www.fidelity.com\/viewpoints\/investing-ideas\/mutual-fund-or-etf \"ETF vs. index mutual fund\").\n\n**Do you plan on trading often?** ETFs are generally better for frequent trading because you can buy and sell shares throughout the trading day. Index mutual funds only let you buy and sell at the very end of each trading day. ETFs typically disclose portfolio holdings on a daily basis, and the market price of an ETF can be tracked intraday during trading hours when the market is open, as with any other stock. Index mutual funds only release this information after 4 p.m. daily. Lastly, with ETFs, you can buy on margin, a strategy where you borrow money from a broker or bank to invest, and use more advanced order types like stop-limit, when an order is executed at a specified price, and short-sale orders, when an investor borrows securities from a broker, sells them, and then expects to buy them back at a lower price. You don't have these options with index mutual funds.\n\n**Do you plan on investing long-term?** Index mutual funds could be right for investors in it for the long haul. That's because long-term investors aren't looking to buy or sell throughout the trading day and don't have to worry about minimizing more active plans' transaction costs, though fees vary depending on the fund and who's managing it.\n\n**Are you in a higher tax bracket?** If you invest outside of a retirement plan, ETFs could be a way to reduce your tax liability. Unlike index mutual funds, ETFs don't trigger capital gains taxes when other investors cash out. In general, both types of passive funds can be good [strategies for reducing taxes on your investments](https:\/\/www.fidelity.com\/viewpoints\/investing-ideas\/tax-strategy \"strategies for reducing taxes on your investments\").\n\n**How to buy ETFs and index funds**\n\nThe process of investing in ETFs and index funds is similar. First, you need an online investment account with a broker. There are a few factors to consider as you [figure out which broker to use](https:\/\/www.fidelity.com\/viewpoints\/active-investor\/how-to-pick-your-broker \"figure out which broker to use\"), such as what their overall fee structure is and how user-friendly their investment platform is. It's also a good idea to research how diverse their selection is of index funds and ETFs. Some companies offer a wide variety of both, while others are more limited.\n\nOnce you have your brokerage account open, you can search through the funds available. Ideally, the platform will detail each fund's goals, fees, and past investment performance. From there you can decide whether the index funds or ETFs are a better fit and then choose specific funds to invest in.\n\n## Need help investing?\nWe've got a range of options to help you reach your goals.\n\n[Learn more](https:\/\/www.fidelity.com\/what-we-offer\/overview)\n\n## More to explore\n### [Research stocks and funds](https:\/\/www.fidelity.com\/go\/research)\nGet investment analysis to help you choose your investments.\n\n### [How to start investing](https:\/\/www.fidelity.com\/viewpoints\/personal-finance\/how-to-start-investing)\nIt doesn't have to be overly complicated. 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Build your knowledge with education for all levels.\n\n*Fidelity Smart Money℠*\n\nWhat the news means for your money, plus tips to help you spend, save, and invest.\n\nActive Investor\n\nOur most advanced investment insights, strategies, and tools.\n\n*Insights from Fidelity Wealth Management* ℠\n\nTimely news, events, and wealth strategies from top Fidelity thought leaders.\n\nWomen Talk Money\n\nReal talk and helpful tips about money, investing, and careers.\n\nEducational Webinars and Events\n\nFree financial education from Fidelity and other leading industry professionals.\n\nDone\n\nAdd subscriptions\n\nNo, thanks.\n\nLoading\n\n- [Investing for beginners](https:\/\/www.fidelity.com\/learning-center\/trading-investing\/investing-for-beginners)\n- [Finding stock and sector ideas](https:\/\/www.fidelity.com\/learning-center\/trading-investing\/finding-stocks-and-sector-ideas)\n- [Managing taxes](https:\/\/www.fidelity.com\/learning-center\/personal-finance\/managing-taxes\/managing-taxes)\n- [Investing for income](https:\/\/www.fidelity.com\/learning-center\/trading-investing\/investing-for-income)\n- [Preparing for retirement](https:\/\/www.fidelity.com\/learning-center\/personal-finance\/retirement\/planning-your-retirement)\n- [Saving for retirement](https:\/\/www.fidelity.com\/learning-center\/personal-finance\/retirement\/saving-for-retirement)\n- [Living in retirement](https:\/\/www.fidelity.com\/learning-center\/personal-finance\/retirement\/planning-your-retirement)\n- [ETFs](https:\/\/www.fidelity.com\/learning-center\/investment-products\/etf\/etfs)\n- [Mutual funds](https:\/\/www.fidelity.com\/learning-center\/investment-products\/mutual-funds\/mutual-funds)\n- [Stocks](https:\/\/www.fidelity.com\/learning-center\/investment-products\/stocks\/stocks)\n- [Using technical analysis](https:\/\/www.fidelity.com\/learning-center\/trading-investing\/technical-analysis\/using-technical-analysis)\n\n1\\. Data as sourced from Bloomberg as of 5\/31\/25.\n\n2\\. Page 9, figure 6, \"Average Expense Ratios of Both Actively Managed and Index Mutual Funds Have Fallen,\" Lei Li and Irina Atamanchuk, \"ICI Research Perspective,\" Volume 31, Number 1, Investment Company Institute®, March 2025.\n\n3\\. Page 10, figure 7, Lei Li and Irina Atamanchuk, \"ICI Research Perspective,\" Volume 31, Number 1, Investment Company Institute®, March 2025.\n\n4\\. Tori Brovet, \"The Best Index Funds,\" Morningstar, April 7, 2025.\n\n5\\. Tessa Campbell and Jake Safane, \"Average Stock Market Return: A Historical Perspective and Future Outlook,\" Business Insider, January 2, 2025.\n\n6\\. 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bPJL+pkG7w4iF1IiZLyXhfbQ7pml9e3604pRtnPccfbDeIDF0v6ba\/uJ4NBrnVJRu9y\/BnOlMoqjVPDpsP3c7dAzw4SR1mWv8zQEYrcClV137yHSITjs3bAQfYYQRRhhhhBFGGAH8D9DXSGd7oPh2AAAAAElFTkSuQmCC)\n\nWelcome 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c1PAMmJH6Pekzn70x\/bWI5vav\/\/bO+0hAT+ntcP8P8IOrGXbdHt4cao9BL8tNnDYQU66wQ4LTrUbPJL+pkG7w4iF1IiZLyXhfbQ7pml9e3604pRtnPccfbDeIDF0v6ba\/uJ4NBrnVJRu9y\/BnOlMoqjVPDpsP3c7dAzw4SR1mWv8zQEYrcClV137yHSITjs3bAQfYYQRRhhhhBFGGAH8D9DXSGd7oPh2AAAAAElFTkSuQmCC)\n\nTo get your conversation started, type a question in the entry field or choose from one of the following popular topics and commonly asked questions.\n\n- What are smart beta ETFs?\n- Where is the money going that I contributed through the 52-week Smart Habit Challenge?\n- How can I invest money in my account into an S\\&P index fund or ETF?\n\nProvide Feedback\n\nanswers will appear above the text input\n\nSubmit message\n\nPrivacy Settings\n\nWhen you visit our website, it may store or retrieve information on your browser, mostly in the form of cookies. Because we respect your right to privacy, you can choose not to allow some types of cookies. Click on the different category headings to find out more and change our default settings. However, blocking some types of cookies may impact your experience on this site and the services we are able to offer.\n***\nStrictly Necessary Cookies\n\nThese cookies are necessary for this website to function and cannot be switched off in our systems. You can set your browser to block or alert you about these cookies, but if you block these cookies, some parts of the site will not work. These cookies do not store any personally identifiable information.\n***\nPerformance Cookies\n\nThese cookies allow us to count visits and traffic sources so we can measure and improve the performance of our site. They help us to know which pages are the most and least popular and see how visitors move around the site. All information these cookies collect is aggregated and therefore anonymous. If you do not allow these cookies we will not know when you have visited our site, and will not be able to monitor its performance.\n***\nFunctional Cookies\n\nThese cookies enable the website to provide enhanced functionality and personalization. They may be set by us or by third party providers whose services we have added to our pages. If you do not allow these cookies then some or all of these services may not function properly.\n***\nTargeting or Advertising Cookies\n\nThese cookies help us present relevant online advertising and marketing messages to you, and measure the effectiveness of our advertising and marketing campaigns. These cookies may be placed on your device by us or by our third-party advertising providers. When these cookies have been placed on your device, they can be recognized by certain advertising platforms used by other websites you visit, and this allows us to present our advertisements to you on those third party websites. While targeting cookies can identify you when you visit different websites, the information collected is anonymous. They do not store personal information, but are based on uniquely identifying your browser and device. If you do not allow these cookies, our online advertisements that you see may be less relevant to you.\n***\n\nCancel\n\nSave","attrs_readable_markdown":"ETF vs. index fund: Which is right for you?\n\nLearn what's different about these 2 funds.\n\n### Key takeaways\n- ETFs and index funds pool many investors' money to create large, professionally managed portfolios.\n- Both fund types may help simplify investing, aim to keep expense ratios low, and strive to reduce risk through diversification.\n- ETFs can be bought and sold throughout the trading day, which may be beneficial for active investors. Index mutual funds can be bought and sold only at the end of the day.\n\nIndex funds and exchange-traded funds (ETFs) can be 2 simple ways to invest. They're alike in that they both pool many investors' money into a professionally managed portfolio that could contain stocks, bonds, and other assets. But there are some technical differences between ETFs and certain index funds. Here's how to tell which may be right for you.\n\n### ETF vs. index fund: Key differences\nThe differences between an [ETF](https:\/\/www.fidelity.com\/learning-center\/investment-products\/etf\/what-are-etfs) and an [index fund](https:\/\/www.fidelity.com\/learning-center\/smart-money\/what-is-an-index-fund) depend on how you define each of those terms. In this article, we're considering an ETF to be a passively managed fund that attempts to mimic the performance of an index, like the S\\&P 500®. And we're considering an index fund to be a [mutual fund](https:\/\/www.fidelity.com\/learning-center\/investment-products\/mutual-funds\/what-are-mutual-funds) that also tracks an index. Really, an index fund could be a mutual fund or an ETF. An increasing number of ETFs use the same actively managed techniques that many mutual funds do, and approximately half of all ETFs today are actively managed. What follows are the differences between an ETF and an index mutual fund.\n\n**Trading access**\n\nOne major difference between ETFs and index mutual funds is when they can be traded. You can buy and sell ETFs at any time throughout the trading day, just as you can with stocks. Also like stocks, an ETF's price can change during the day based on the performance of the fund's investments.\n\nOn the other hand, you can buy or sell shares in index mutual funds only once at the close of each trading day for the price set at 4 p.m. ET. You can put in an order at any time, but it will only go through at the end of the day. At that point, the fund manager will also release the updated index mutual fund share price based on the day's market results.\n\n**Investment goals**\n\nWhether it's an ETF or a mutual fund, the goal of any index fund is to mimic the results of a specific market index, like the S\\&P 500®. According to Fidelity analysis of Bloomberg data, nearly half of all ETFs are passively managed,1 meaning the assets within the fund simply imitate the index it's tracking. However, active ETFs may have different goals, like ones managed by a broker who tries to pick the best-performing stocks within the S\\&P 500® to earn a potentially higher return.\n\nThere's more transparency with ETFs, which typically offer daily portfolio holding disclosures. Index mutual funds only release details on specific investments monthly or quarterly.\n\n**Fees**\n\nPassive ETFs and mutual funds tend to be low-cost investments. Each charges shareholders an annual fee called an expense ratio. Expense ratio is a fund's total annual operating expenses divided by its net assets and can be found in the fund's most recent prospectus. The actual cost to maintain a fund ultimately depends on which company and fund you choose. The Investment Company Institute® found index mutual funds' expense ratios were 0.05% per year on average in 2024, a rate that's been declining for years.2 Index equity ETFs' asset-weighted average expense ratio for 2024 was higher, at 0.14%.3 But there are multiple S\\&P 500® ETFs that charge 0.03% or less per year.4 Be sure to check expense ratios before investing because the less you pay in fees each year, the more money that stays in your portfolio. (Psst … Fidelity offers [index funds with 0% expense ratios.](https:\/\/www.fidelity.com\/mutual-funds\/investing-ideas\/index-funds \"index funds with 0% expense ratios.\"))\n\nBut expense ratios aren't the only fees that show ETFs vs. index funds' differences. With ETFs, you could owe a trading commission, a flat fee each time you buy or sell, depending on your broker (the investment company handling your trades). Some brokers don't charge trading commissions on ETFs though. Other fees and expenses applicable to continued investment are described in the fund's current prospectus. With index mutual funds, brokers could charge a commission and\/or a load fee for buying and selling. The load fee could be a flat fee or a percentage of your transaction. Still, there are no-load index mutual funds that don't charge this fee. Other fees and expenses applicable to continued investment are described in the fund's current prospectus.\n\nWhen you buy and sell ETFs during the trading day, you might also owe something called a bid-ask spread. This means you pay more than the market price to buy and receive less than the market price to sell to compensate the broker for processing your trade. The spread is usually smaller for popular ETFs with high trading volume. Index mutual funds don't charge this spread.\n\n**Taxes**\n\nAnother cost to consider is [capital gains taxes](https:\/\/www.fidelity.com\/learning-center\/smart-money\/capital-gains-tax-rates), which you're on the hook for if you sell shares of an ETF or an index mutual fund for more than the amount you paid for them.\n\nIndex mutual funds could charge an extra tax. If another investor cashes out, the fund manager has to sell portfolio investments to get the investor this cash, owing taxes on any investments sold for a gain. The fund then passes on these taxes to the remaining investors. In other words, you might owe capital gains taxes in a year you haven't sold any index fund shares yourself. ETFs don't owe taxes when investors cash out, making ETFs potentially more tax-efficient than mutual funds.\n\n**Minimum investment**\n\nETFs generally don't require a minimum initial investment. You can find [index mutual funds with \\$0 minimum investments](https:\/\/www.fidelity.com\/mutual-funds\/investing-ideas\/index-funds \"index mutual funds with $0 minimum investments\"), but many funds do set minimums that run from as little as \\$1 to \\$3,000 to buy in.\n\nETFs are usually not an investment option through workplace retirement plans, like a 401(k). If you want to invest through a workplace plan, you might need to stick with index funds and other mutual funds, depending on what your employer offers.\n\n**Automation**\n\nSome index fund managers offer regular, automatic purchases of their mutual funds, which isn't an option with ETFs.\n\n### Index fund vs. ETF: Major similarities\nDespite the technical differences between index funds and ETFs, they're similar in many ways.\n\n**Simple to manage**\n\nWith both index funds and ETFs, you make just one purchase to buy into a large professionally managed portfolio. You don't need to buy all of the components of the portfolio individually.\n\n**Reduced risk through diversification**\n\nDiversification is the practice of spreading your investments around so that your exposure to any one type of asset is limited. It's designed to help reduce the volatility of your portfolio over time. Both ETFs and index funds allow you to spread your money across a portfolio with dozens, if not hundreds, of stocks and other investments, so you can get that diversification.\n\n**Strong historical long-term returns**\n\nIndex funds and passive ETFs aim to match the return of the market or a portion of it. This passive strategy has the potential for long-term growth, considering the historical performance of the S\\&P 500®, which has shown an average return of around 10% a year since 1928. But it's important to remember that past performance doesn't guarantee future results.5 While active ETFs and active mutual funds try to earn higher returns than the market, only about 1 out of 4 active funds outearned the market over the past 10 years.6 Still, some [active funds outperform others](https:\/\/www.fidelity.com\/mutual-funds\/investing-ideas\/beat-the-benchmark \"active funds outperform others\").\n\n### Should you invest with ETFs or mutual funds?\nWhen choosing what to invest in, focus on the goal of the fund itself and how that aligns with your personal goals. Here are some questions to ask yourself before investing in an [ETF vs. index mutual fund](https:\/\/www.fidelity.com\/viewpoints\/investing-ideas\/mutual-fund-or-etf \"ETF vs. index mutual fund\").\n\n**Do you plan on trading often?** ETFs are generally better for frequent trading because you can buy and sell shares throughout the trading day. Index mutual funds only let you buy and sell at the very end of each trading day. ETFs typically disclose portfolio holdings on a daily basis, and the market price of an ETF can be tracked intraday during trading hours when the market is open, as with any other stock. Index mutual funds only release this information after 4 p.m. daily. Lastly, with ETFs, you can buy on margin, a strategy where you borrow money from a broker or bank to invest, and use more advanced order types like stop-limit, when an order is executed at a specified price, and short-sale orders, when an investor borrows securities from a broker, sells them, and then expects to buy them back at a lower price. You don't have these options with index mutual funds.\n\n**Do you plan on investing long-term?** Index mutual funds could be right for investors in it for the long haul. That's because long-term investors aren't looking to buy or sell throughout the trading day and don't have to worry about minimizing more active plans' transaction costs, though fees vary depending on the fund and who's managing it.\n\n**Are you in a higher tax bracket?** If you invest outside of a retirement plan, ETFs could be a way to reduce your tax liability. Unlike index mutual funds, ETFs don't trigger capital gains taxes when other investors cash out. In general, both types of passive funds can be good [strategies for reducing taxes on your investments](https:\/\/www.fidelity.com\/viewpoints\/investing-ideas\/tax-strategy \"strategies for reducing taxes on your investments\").\n\n**How to buy ETFs and index funds**\n\nThe process of investing in ETFs and index funds is similar. First, you need an online investment account with a broker. There are a few factors to consider as you [figure out which broker to use](https:\/\/www.fidelity.com\/viewpoints\/active-investor\/how-to-pick-your-broker \"figure out which broker to use\"), such as what their overall fee structure is and how user-friendly their investment platform is. It's also a good idea to research how diverse their selection is of index funds and ETFs. Some companies offer a wide variety of both, while others are more limited.\n\nOnce you have your brokerage account open, you can search through the funds available. Ideally, the platform will detail each fund's goals, fees, and past investment performance. From there you can decide whether the index funds or ETFs are a better fit and then choose specific funds to invest in.","meta_canonical":null}

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Boilerpipe Text	ETF vs. index fund: Which is right for you? Learn what's different about these 2 funds. Key takeaways ETFs and index funds pool many investors' money to create large, professionally managed portfolios. Both fund types may help simplify investing, aim to keep expense ratios low, and strive to reduce risk through diversification. ETFs can be bought and sold throughout the trading day, which may be beneficial for active investors. Index mutual funds can be bought and sold only at the end of the day. Index funds and exchange-traded funds (ETFs) can be 2 simple ways to invest. They're alike in that they both pool many investors' money into a professionally managed portfolio that could contain stocks, bonds, and other assets. But there are some technical differences between ETFs and certain index funds. Here's how to tell which may be right for you. ETF vs. index fund: Key differences The differences between an ETF and an index fund depend on how you define each of those terms. In this article, we're considering an ETF to be a passively managed fund that attempts to mimic the performance of an index, like the S&P 500 ® . And we're considering an index fund to be a mutual fund that also tracks an index. Really, an index fund could be a mutual fund or an ETF. An increasing number of ETFs use the same actively managed techniques that many mutual funds do, and approximately half of all ETFs today are actively managed. What follows are the differences between an ETF and an index mutual fund. Trading access One major difference between ETFs and index mutual funds is when they can be traded. You can buy and sell ETFs at any time throughout the trading day, just as you can with stocks. Also like stocks, an ETF's price can change during the day based on the performance of the fund's investments. On the other hand, you can buy or sell shares in index mutual funds only once at the close of each trading day for the price set at 4 p.m. ET. You can put in an order at any time, but it will only go through at the end of the day. At that point, the fund manager will also release the updated index mutual fund share price based on the day's market results. Investment goals Whether it's an ETF or a mutual fund, the goal of any index fund is to mimic the results of a specific market index, like the S&P 500 ® . According to Fidelity analysis of Bloomberg data, nearly half of all ETFs are passively managed, 1 meaning the assets within the fund simply imitate the index it's tracking. However, active ETFs may have different goals, like ones managed by a broker who tries to pick the best-performing stocks within the S&P 500 ® to earn a potentially higher return. There's more transparency with ETFs, which typically offer daily portfolio holding disclosures. Index mutual funds only release details on specific investments monthly or quarterly. Fees Passive ETFs and mutual funds tend to be low-cost investments. Each charges shareholders an annual fee called an expense ratio. Expense ratio is a fund's total annual operating expenses divided by its net assets and can be found in the fund's most recent prospectus. The actual cost to maintain a fund ultimately depends on which company and fund you choose. The Investment Company Institute ® found index mutual funds' expense ratios were 0.05% per year on average in 2024, a rate that's been declining for years. 2 Index equity ETFs' asset-weighted average expense ratio for 2024 was higher, at 0.14%. 3 But there are multiple S&P 500 ® ETFs that charge 0.03% or less per year. 4 Be sure to check expense ratios before investing because the less you pay in fees each year, the more money that stays in your portfolio. (Psst … Fidelity offers index funds with 0% expense ratios. ) But expense ratios aren't the only fees that show ETFs vs. index funds' differences. With ETFs, you could owe a trading commission, a flat fee each time you buy or sell, depending on your broker (the investment company handling your trades). Some brokers don't charge trading commissions on ETFs though. Other fees and expenses applicable to continued investment are described in the fund's current prospectus. With index mutual funds, brokers could charge a commission and/or a load fee for buying and selling. The load fee could be a flat fee or a percentage of your transaction. Still, there are no-load index mutual funds that don't charge this fee. Other fees and expenses applicable to continued investment are described in the fund's current prospectus. When you buy and sell ETFs during the trading day, you might also owe something called a bid-ask spread. This means you pay more than the market price to buy and receive less than the market price to sell to compensate the broker for processing your trade. The spread is usually smaller for popular ETFs with high trading volume. Index mutual funds don't charge this spread. Taxes Another cost to consider is capital gains taxes , which you're on the hook for if you sell shares of an ETF or an index mutual fund for more than the amount you paid for them. Index mutual funds could charge an extra tax. If another investor cashes out, the fund manager has to sell portfolio investments to get the investor this cash, owing taxes on any investments sold for a gain. The fund then passes on these taxes to the remaining investors. In other words, you might owe capital gains taxes in a year you haven't sold any index fund shares yourself. ETFs don't owe taxes when investors cash out, making ETFs potentially more tax-efficient than mutual funds. Minimum investment ETFs generally don't require a minimum initial investment. You can find index mutual funds with $0 minimum investments , but many funds do set minimums that run from as little as $1 to $3,000 to buy in. ETFs are usually not an investment option through workplace retirement plans, like a 401(k). If you want to invest through a workplace plan, you might need to stick with index funds and other mutual funds, depending on what your employer offers. Automation Some index fund managers offer regular, automatic purchases of their mutual funds, which isn't an option with ETFs. Index fund vs. ETF: Major similarities Despite the technical differences between index funds and ETFs, they're similar in many ways. Simple to manage With both index funds and ETFs, you make just one purchase to buy into a large professionally managed portfolio. You don't need to buy all of the components of the portfolio individually. Reduced risk through diversification Diversification is the practice of spreading your investments around so that your exposure to any one type of asset is limited. It's designed to help reduce the volatility of your portfolio over time. Both ETFs and index funds allow you to spread your money across a portfolio with dozens, if not hundreds, of stocks and other investments, so you can get that diversification. Strong historical long-term returns Index funds and passive ETFs aim to match the return of the market or a portion of it. This passive strategy has the potential for long-term growth, considering the historical performance of the S&P 500 ® , which has shown an average return of around 10% a year since 1928. But it's important to remember that past performance doesn't guarantee future results. 5 While active ETFs and active mutual funds try to earn higher returns than the market, only about 1 out of 4 active funds outearned the market over the past 10 years. 6 Still, some active funds outperform others . Should you invest with ETFs or mutual funds? When choosing what to invest in, focus on the goal of the fund itself and how that aligns with your personal goals. Here are some questions to ask yourself before investing in an ETF vs. index mutual fund . Do you plan on trading often? ETFs are generally better for frequent trading because you can buy and sell shares throughout the trading day. Index mutual funds only let you buy and sell at the very end of each trading day. ETFs typically disclose portfolio holdings on a daily basis, and the market price of an ETF can be tracked intraday during trading hours when the market is open, as with any other stock. Index mutual funds only release this information after 4 p.m. daily. Lastly, with ETFs, you can buy on margin, a strategy where you borrow money from a broker or bank to invest, and use more advanced order types like stop-limit, when an order is executed at a specified price, and short-sale orders, when an investor borrows securities from a broker, sells them, and then expects to buy them back at a lower price. You don't have these options with index mutual funds. Do you plan on investing long-term? Index mutual funds could be right for investors in it for the long haul. That's because long-term investors aren't looking to buy or sell throughout the trading day and don't have to worry about minimizing more active plans' transaction costs, though fees vary depending on the fund and who's managing it. Are you in a higher tax bracket? If you invest outside of a retirement plan, ETFs could be a way to reduce your tax liability. Unlike index mutual funds, ETFs don't trigger capital gains taxes when other investors cash out. In general, both types of passive funds can be good strategies for reducing taxes on your investments . How to buy ETFs and index funds The process of investing in ETFs and index funds is similar. First, you need an online investment account with a broker. There are a few factors to consider as you figure out which broker to use , such as what their overall fee structure is and how user-friendly their investment platform is. It's also a good idea to research how diverse their selection is of index funds and ETFs. Some companies offer a wide variety of both, while others are more limited. Once you have your brokerage account open, you can search through the funds available. Ideally, the platform will detail each fund's goals, fees, and past investment performance. From there you can decide whether the index funds or ETFs are a better fit and then choose specific funds to invest in.
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Share ![Share](https://www.fidelity.com/bin-public/600_Fidelity_Com_English/images/article/share.svg) Close Popover * Fidelity Investments Clicking a link will open a new window. - [Facebook](https://www.fidelity.com/learning-center/smart-money/etf-vs-index-fund#facebook) - [Twitter](https://www.fidelity.com/learning-center/smart-money/etf-vs-index-fund#twitter) - [LinkedIn](https://www.fidelity.com/learning-center/smart-money/etf-vs-index-fund#linkedin) [Print ![Print](https://www.fidelity.com/bin-public/600_Fidelity_Com_English/images/article/Print.svg)](https://www.fidelity.com/learning-center/smart-money/etf-vs-index-fund#print) # ETF vs. index fund: Which is right for you? Learn what's different about these 2 funds. Fidelity Viewpoints ![](https://www.fidelity.com/bin-public/600_Fidelity_Com_English/images/learning-center/heros/etf-vs-index-fund_708716244_banner.png) ### Key takeaways - ETFs and index funds pool many investors' money to create large, professionally managed portfolios. - Both fund types may help simplify investing, aim to keep expense ratios low, and strive to reduce risk through diversification. - ETFs can be bought and sold throughout the trading day, which may be beneficial for active investors. Index mutual funds can be bought and sold only at the end of the day. Index funds and exchange-traded funds (ETFs) can be 2 simple ways to invest. They're alike in that they both pool many investors' money into a professionally managed portfolio that could contain stocks, bonds, and other assets. But there are some technical differences between ETFs and certain index funds. Here's how to tell which may be right for you. ### ETF vs. index fund: Key differences The differences between an [ETF](https://www.fidelity.com/learning-center/investment-products/etf/what-are-etfs) and an [index fund](https://www.fidelity.com/learning-center/smart-money/what-is-an-index-fund) depend on how you define each of those terms. In this article, we're considering an ETF to be a passively managed fund that attempts to mimic the performance of an index, like the S\&P 500®. And we're considering an index fund to be a [mutual fund](https://www.fidelity.com/learning-center/investment-products/mutual-funds/what-are-mutual-funds) that also tracks an index. Really, an index fund could be a mutual fund or an ETF. An increasing number of ETFs use the same actively managed techniques that many mutual funds do, and approximately half of all ETFs today are actively managed. What follows are the differences between an ETF and an index mutual fund. Trading access One major difference between ETFs and index mutual funds is when they can be traded. You can buy and sell ETFs at any time throughout the trading day, just as you can with stocks. Also like stocks, an ETF's price can change during the day based on the performance of the fund's investments. On the other hand, you can buy or sell shares in index mutual funds only once at the close of each trading day for the price set at 4 p.m. ET. You can put in an order at any time, but it will only go through at the end of the day. At that point, the fund manager will also release the updated index mutual fund share price based on the day's market results. Investment goals Whether it's an ETF or a mutual fund, the goal of any index fund is to mimic the results of a specific market index, like the S\&P 500®. According to Fidelity analysis of Bloomberg data, nearly half of all ETFs are passively managed,1 meaning the assets within the fund simply imitate the index it's tracking. However, active ETFs may have different goals, like ones managed by a broker who tries to pick the best-performing stocks within the S\&P 500® to earn a potentially higher return. There's more transparency with ETFs, which typically offer daily portfolio holding disclosures. Index mutual funds only release details on specific investments monthly or quarterly. Fees Passive ETFs and mutual funds tend to be low-cost investments. Each charges shareholders an annual fee called an expense ratio. Expense ratio is a fund's total annual operating expenses divided by its net assets and can be found in the fund's most recent prospectus. The actual cost to maintain a fund ultimately depends on which company and fund you choose. The Investment Company Institute® found index mutual funds' expense ratios were 0.05% per year on average in 2024, a rate that's been declining for years.2 Index equity ETFs' asset-weighted average expense ratio for 2024 was higher, at 0.14%.3 But there are multiple S\&P 500® ETFs that charge 0.03% or less per year.4 Be sure to check expense ratios before investing because the less you pay in fees each year, the more money that stays in your portfolio. (Psst … Fidelity offers [index funds with 0% expense ratios.](https://www.fidelity.com/mutual-funds/investing-ideas/index-funds "index funds with 0% expense ratios.")) But expense ratios aren't the only fees that show ETFs vs. index funds' differences. With ETFs, you could owe a trading commission, a flat fee each time you buy or sell, depending on your broker (the investment company handling your trades). Some brokers don't charge trading commissions on ETFs though. Other fees and expenses applicable to continued investment are described in the fund's current prospectus. With index mutual funds, brokers could charge a commission and/or a load fee for buying and selling. The load fee could be a flat fee or a percentage of your transaction. Still, there are no-load index mutual funds that don't charge this fee. Other fees and expenses applicable to continued investment are described in the fund's current prospectus. When you buy and sell ETFs during the trading day, you might also owe something called a bid-ask spread. This means you pay more than the market price to buy and receive less than the market price to sell to compensate the broker for processing your trade. The spread is usually smaller for popular ETFs with high trading volume. Index mutual funds don't charge this spread. Taxes Another cost to consider is [capital gains taxes](https://www.fidelity.com/learning-center/smart-money/capital-gains-tax-rates), which you're on the hook for if you sell shares of an ETF or an index mutual fund for more than the amount you paid for them. Index mutual funds could charge an extra tax. If another investor cashes out, the fund manager has to sell portfolio investments to get the investor this cash, owing taxes on any investments sold for a gain. The fund then passes on these taxes to the remaining investors. In other words, you might owe capital gains taxes in a year you haven't sold any index fund shares yourself. ETFs don't owe taxes when investors cash out, making ETFs potentially more tax-efficient than mutual funds. Minimum investment ETFs generally don't require a minimum initial investment. You can find [index mutual funds with \$0 minimum investments](https://www.fidelity.com/mutual-funds/investing-ideas/index-funds "index mutual funds with $0 minimum investments"), but many funds do set minimums that run from as little as \$1 to \$3,000 to buy in. ETFs are usually not an investment option through workplace retirement plans, like a 401(k). If you want to invest through a workplace plan, you might need to stick with index funds and other mutual funds, depending on what your employer offers. Automation Some index fund managers offer regular, automatic purchases of their mutual funds, which isn't an option with ETFs. ### Index fund vs. ETF: Major similarities Despite the technical differences between index funds and ETFs, they're similar in many ways. Simple to manage With both index funds and ETFs, you make just one purchase to buy into a large professionally managed portfolio. You don't need to buy all of the components of the portfolio individually. Reduced risk through diversification Diversification is the practice of spreading your investments around so that your exposure to any one type of asset is limited. It's designed to help reduce the volatility of your portfolio over time. Both ETFs and index funds allow you to spread your money across a portfolio with dozens, if not hundreds, of stocks and other investments, so you can get that diversification. Strong historical long-term returns Index funds and passive ETFs aim to match the return of the market or a portion of it. This passive strategy has the potential for long-term growth, considering the historical performance of the S\&P 500®, which has shown an average return of around 10% a year since 1928. But it's important to remember that past performance doesn't guarantee future results.5 While active ETFs and active mutual funds try to earn higher returns than the market, only about 1 out of 4 active funds outearned the market over the past 10 years.6 Still, some [active funds outperform others](https://www.fidelity.com/mutual-funds/investing-ideas/beat-the-benchmark "active funds outperform others"). ### Should you invest with ETFs or mutual funds? When choosing what to invest in, focus on the goal of the fund itself and how that aligns with your personal goals. Here are some questions to ask yourself before investing in an [ETF vs. index mutual fund](https://www.fidelity.com/viewpoints/investing-ideas/mutual-fund-or-etf "ETF vs. index mutual fund"). Do you plan on trading often? ETFs are generally better for frequent trading because you can buy and sell shares throughout the trading day. Index mutual funds only let you buy and sell at the very end of each trading day. ETFs typically disclose portfolio holdings on a daily basis, and the market price of an ETF can be tracked intraday during trading hours when the market is open, as with any other stock. Index mutual funds only release this information after 4 p.m. daily. Lastly, with ETFs, you can buy on margin, a strategy where you borrow money from a broker or bank to invest, and use more advanced order types like stop-limit, when an order is executed at a specified price, and short-sale orders, when an investor borrows securities from a broker, sells them, and then expects to buy them back at a lower price. You don't have these options with index mutual funds. Do you plan on investing long-term? Index mutual funds could be right for investors in it for the long haul. That's because long-term investors aren't looking to buy or sell throughout the trading day and don't have to worry about minimizing more active plans' transaction costs, though fees vary depending on the fund and who's managing it. Are you in a higher tax bracket? If you invest outside of a retirement plan, ETFs could be a way to reduce your tax liability. Unlike index mutual funds, ETFs don't trigger capital gains taxes when other investors cash out. In general, both types of passive funds can be good [strategies for reducing taxes on your investments](https://www.fidelity.com/viewpoints/investing-ideas/tax-strategy "strategies for reducing taxes on your investments"). How to buy ETFs and index funds The process of investing in ETFs and index funds is similar. First, you need an online investment account with a broker. There are a few factors to consider as you [figure out which broker to use](https://www.fidelity.com/viewpoints/active-investor/how-to-pick-your-broker "figure out which broker to use"), such as what their overall fee structure is and how user-friendly their investment platform is. It's also a good idea to research how diverse their selection is of index funds and ETFs. Some companies offer a wide variety of both, while others are more limited. Once you have your brokerage account open, you can search through the funds available. Ideally, the platform will detail each fund's goals, fees, and past investment performance. From there you can decide whether the index funds or ETFs are a better fit and then choose specific funds to invest in. ## Need help investing? We've got a range of options to help you reach your goals. [Learn more](https://www.fidelity.com/what-we-offer/overview) ## More to explore ### [Research stocks and funds](https://www.fidelity.com/go/research) Get investment analysis to help you choose your investments. ### [How to start investing](https://www.fidelity.com/viewpoints/personal-finance/how-to-start-investing) It doesn't have to be overly complicated. 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Loading - [Investing for beginners](https://www.fidelity.com/learning-center/trading-investing/investing-for-beginners) - [Finding stock and sector ideas](https://www.fidelity.com/learning-center/trading-investing/finding-stocks-and-sector-ideas) - [Managing taxes](https://www.fidelity.com/learning-center/personal-finance/managing-taxes/managing-taxes) - [Investing for income](https://www.fidelity.com/learning-center/trading-investing/investing-for-income) - [Preparing for retirement](https://www.fidelity.com/learning-center/personal-finance/retirement/planning-your-retirement) - [Saving for retirement](https://www.fidelity.com/learning-center/personal-finance/retirement/saving-for-retirement) - [Living in retirement](https://www.fidelity.com/learning-center/personal-finance/retirement/planning-your-retirement) - [ETFs](https://www.fidelity.com/learning-center/investment-products/etf/etfs) - [Mutual funds](https://www.fidelity.com/learning-center/investment-products/mutual-funds/mutual-funds) - [Stocks](https://www.fidelity.com/learning-center/investment-products/stocks/stocks) - [Using technical analysis](https://www.fidelity.com/learning-center/trading-investing/technical-analysis/using-technical-analysis) 1\. Data as sourced from Bloomberg as of 5/31/25. 2\. Page 9, figure 6, "Average Expense Ratios of Both Actively Managed and Index Mutual Funds Have Fallen," Lei Li and Irina Atamanchuk, "ICI Research Perspective," Volume 31, Number 1, Investment Company Institute®, March 2025. 3\. Page 10, figure 7, Lei Li and Irina Atamanchuk, "ICI Research Perspective," Volume 31, Number 1, Investment Company Institute®, March 2025. 4\. Tori Brovet, "The Best Index Funds," Morningstar, April 7, 2025. 5\. Tessa Campbell and Jake Safane, "Average Stock Market Return: A Historical Perspective and Future Outlook," Business Insider, January 2, 2025. 6\. Jason Zweig, "Why Your Fund Manager Can't Beat Today's Stock Market," The Wall Street Journal, July 5, 2024. Investing involves risk, including risk of loss. Past performance is no guarantee of future results. Diversification and asset allocation do not ensure a profit or guarantee against loss. Exchange-traded products (ETPs) are subject to market volatility and the risks of their underlying securities, which may include the risks associated with investing in smaller companies, foreign securities, commodities, and fixed income investments. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks, all of which are magnified in emerging markets. ETPs that target a small universe of securities, such as a specific region or market sector, are generally subject to greater market volatility, as well as to the specific risks associated with that sector, region, or other focus. ETPs that use derivatives, leverage, or complex investment strategies are subject to additional risks. The return of an index ETP is usually different from that of the index it tracks because of fees, expenses, and tracking error. An ETP may trade at a premium or discount to its net asset value (NAV) (or indicative value in the case of exchange-traded notes). 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zw4SR1mWv8zQEYrcClV137yHSITjs3bAQfYYQRRhhhhBFGGAH8D9DXSGd7oPh2AAAAAElFTkSuQmCC) 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![](data:image/png;base64,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Readable Markdown	ETF vs. index fund: Which is right for you? Learn what's different about these 2 funds. ### Key takeaways - ETFs and index funds pool many investors' money to create large, professionally managed portfolios. - Both fund types may help simplify investing, aim to keep expense ratios low, and strive to reduce risk through diversification. - ETFs can be bought and sold throughout the trading day, which may be beneficial for active investors. Index mutual funds can be bought and sold only at the end of the day. Index funds and exchange-traded funds (ETFs) can be 2 simple ways to invest. They're alike in that they both pool many investors' money into a professionally managed portfolio that could contain stocks, bonds, and other assets. But there are some technical differences between ETFs and certain index funds. Here's how to tell which may be right for you. ### ETF vs. index fund: Key differences The differences between an [ETF](https://www.fidelity.com/learning-center/investment-products/etf/what-are-etfs) and an [index fund](https://www.fidelity.com/learning-center/smart-money/what-is-an-index-fund) depend on how you define each of those terms. In this article, we're considering an ETF to be a passively managed fund that attempts to mimic the performance of an index, like the S\&P 500®. And we're considering an index fund to be a [mutual fund](https://www.fidelity.com/learning-center/investment-products/mutual-funds/what-are-mutual-funds) that also tracks an index. Really, an index fund could be a mutual fund or an ETF. An increasing number of ETFs use the same actively managed techniques that many mutual funds do, and approximately half of all ETFs today are actively managed. What follows are the differences between an ETF and an index mutual fund. Trading access One major difference between ETFs and index mutual funds is when they can be traded. You can buy and sell ETFs at any time throughout the trading day, just as you can with stocks. Also like stocks, an ETF's price can change during the day based on the performance of the fund's investments. On the other hand, you can buy or sell shares in index mutual funds only once at the close of each trading day for the price set at 4 p.m. ET. You can put in an order at any time, but it will only go through at the end of the day. At that point, the fund manager will also release the updated index mutual fund share price based on the day's market results. Investment goals Whether it's an ETF or a mutual fund, the goal of any index fund is to mimic the results of a specific market index, like the S\&P 500®. According to Fidelity analysis of Bloomberg data, nearly half of all ETFs are passively managed,1 meaning the assets within the fund simply imitate the index it's tracking. However, active ETFs may have different goals, like ones managed by a broker who tries to pick the best-performing stocks within the S\&P 500® to earn a potentially higher return. There's more transparency with ETFs, which typically offer daily portfolio holding disclosures. Index mutual funds only release details on specific investments monthly or quarterly. Fees Passive ETFs and mutual funds tend to be low-cost investments. Each charges shareholders an annual fee called an expense ratio. Expense ratio is a fund's total annual operating expenses divided by its net assets and can be found in the fund's most recent prospectus. The actual cost to maintain a fund ultimately depends on which company and fund you choose. The Investment Company Institute® found index mutual funds' expense ratios were 0.05% per year on average in 2024, a rate that's been declining for years.2 Index equity ETFs' asset-weighted average expense ratio for 2024 was higher, at 0.14%.3 But there are multiple S\&P 500® ETFs that charge 0.03% or less per year.4 Be sure to check expense ratios before investing because the less you pay in fees each year, the more money that stays in your portfolio. (Psst … Fidelity offers [index funds with 0% expense ratios.](https://www.fidelity.com/mutual-funds/investing-ideas/index-funds "index funds with 0% expense ratios.")) But expense ratios aren't the only fees that show ETFs vs. index funds' differences. With ETFs, you could owe a trading commission, a flat fee each time you buy or sell, depending on your broker (the investment company handling your trades). Some brokers don't charge trading commissions on ETFs though. Other fees and expenses applicable to continued investment are described in the fund's current prospectus. With index mutual funds, brokers could charge a commission and/or a load fee for buying and selling. The load fee could be a flat fee or a percentage of your transaction. Still, there are no-load index mutual funds that don't charge this fee. Other fees and expenses applicable to continued investment are described in the fund's current prospectus. When you buy and sell ETFs during the trading day, you might also owe something called a bid-ask spread. This means you pay more than the market price to buy and receive less than the market price to sell to compensate the broker for processing your trade. The spread is usually smaller for popular ETFs with high trading volume. Index mutual funds don't charge this spread. Taxes Another cost to consider is [capital gains taxes](https://www.fidelity.com/learning-center/smart-money/capital-gains-tax-rates), which you're on the hook for if you sell shares of an ETF or an index mutual fund for more than the amount you paid for them. Index mutual funds could charge an extra tax. If another investor cashes out, the fund manager has to sell portfolio investments to get the investor this cash, owing taxes on any investments sold for a gain. The fund then passes on these taxes to the remaining investors. In other words, you might owe capital gains taxes in a year you haven't sold any index fund shares yourself. ETFs don't owe taxes when investors cash out, making ETFs potentially more tax-efficient than mutual funds. Minimum investment ETFs generally don't require a minimum initial investment. You can find [index mutual funds with \$0 minimum investments](https://www.fidelity.com/mutual-funds/investing-ideas/index-funds "index mutual funds with $0 minimum investments"), but many funds do set minimums that run from as little as \$1 to \$3,000 to buy in. ETFs are usually not an investment option through workplace retirement plans, like a 401(k). If you want to invest through a workplace plan, you might need to stick with index funds and other mutual funds, depending on what your employer offers. Automation Some index fund managers offer regular, automatic purchases of their mutual funds, which isn't an option with ETFs. ### Index fund vs. ETF: Major similarities Despite the technical differences between index funds and ETFs, they're similar in many ways. Simple to manage With both index funds and ETFs, you make just one purchase to buy into a large professionally managed portfolio. You don't need to buy all of the components of the portfolio individually. Reduced risk through diversification Diversification is the practice of spreading your investments around so that your exposure to any one type of asset is limited. It's designed to help reduce the volatility of your portfolio over time. Both ETFs and index funds allow you to spread your money across a portfolio with dozens, if not hundreds, of stocks and other investments, so you can get that diversification. Strong historical long-term returns Index funds and passive ETFs aim to match the return of the market or a portion of it. This passive strategy has the potential for long-term growth, considering the historical performance of the S\&P 500®, which has shown an average return of around 10% a year since 1928. But it's important to remember that past performance doesn't guarantee future results.5 While active ETFs and active mutual funds try to earn higher returns than the market, only about 1 out of 4 active funds outearned the market over the past 10 years.6 Still, some [active funds outperform others](https://www.fidelity.com/mutual-funds/investing-ideas/beat-the-benchmark "active funds outperform others"). ### Should you invest with ETFs or mutual funds? When choosing what to invest in, focus on the goal of the fund itself and how that aligns with your personal goals. Here are some questions to ask yourself before investing in an [ETF vs. index mutual fund](https://www.fidelity.com/viewpoints/investing-ideas/mutual-fund-or-etf "ETF vs. index mutual fund"). Do you plan on trading often? ETFs are generally better for frequent trading because you can buy and sell shares throughout the trading day. Index mutual funds only let you buy and sell at the very end of each trading day. ETFs typically disclose portfolio holdings on a daily basis, and the market price of an ETF can be tracked intraday during trading hours when the market is open, as with any other stock. Index mutual funds only release this information after 4 p.m. daily. Lastly, with ETFs, you can buy on margin, a strategy where you borrow money from a broker or bank to invest, and use more advanced order types like stop-limit, when an order is executed at a specified price, and short-sale orders, when an investor borrows securities from a broker, sells them, and then expects to buy them back at a lower price. You don't have these options with index mutual funds. Do you plan on investing long-term? Index mutual funds could be right for investors in it for the long haul. That's because long-term investors aren't looking to buy or sell throughout the trading day and don't have to worry about minimizing more active plans' transaction costs, though fees vary depending on the fund and who's managing it. Are you in a higher tax bracket? If you invest outside of a retirement plan, ETFs could be a way to reduce your tax liability. Unlike index mutual funds, ETFs don't trigger capital gains taxes when other investors cash out. In general, both types of passive funds can be good [strategies for reducing taxes on your investments](https://www.fidelity.com/viewpoints/investing-ideas/tax-strategy "strategies for reducing taxes on your investments"). How to buy ETFs and index funds The process of investing in ETFs and index funds is similar. First, you need an online investment account with a broker. There are a few factors to consider as you [figure out which broker to use](https://www.fidelity.com/viewpoints/active-investor/how-to-pick-your-broker "figure out which broker to use"), such as what their overall fee structure is and how user-friendly their investment platform is. It's also a good idea to research how diverse their selection is of index funds and ETFs. Some companies offer a wide variety of both, while others are more limited. Once you have your brokerage account open, you can search through the funds available. Ideally, the platform will detail each fund's goals, fees, and past investment performance. From there you can decide whether the index funds or ETFs are a better fit and then choose specific funds to invest in.
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