Index Funds vs ETFs: What Investors Should Know

Index funds vs ETFs explained: how they work, key differences, fees, taxes, and which may fit a beginner investing plan.

Index funds and ETFs (quick definitions)

Both can track an index (like the S&P 500) and provide instant diversification. The differences are mostly about how they trade and how they are purchased.

Key differences

  • ETFs trade like stocks throughout the day; mutual funds price once per day.
  • ETFs can be more tax-efficient in some markets.
  • Both can be low-cost; compare expense ratios and spreads.

Research holdings and valuation context

If you invest in ETFs, understand what you own. Use our ETF tools and stock pages to research underlying holdings.

ETF analysisBrowse stocks

FAQs

Are ETFs safe for beginners?▼

ETFs can be a good starting point because they diversify risk. Like all investments, they can fall in price, so choose based on your horizon and risk tolerance.

Do ETFs pay dividends?▼

Many ETFs distribute dividends from their holdings. The amount depends on the underlying companies and fund policy.

Related

Investing 101Stock market basics

Intrinsic Investor is for education and research only. Not financial advice.