Index funds and ETFs are two of the most popular investment vehicles. Both aim to offer broad exposure, but they differ in structure and use.
## What are index funds?
– Priced once daily at NAV.
– Trusted globally.
– Examples: Vanguard 500 Index Fund (VFIAX), Fidelity ZERO Total Market Index Fund.
## What are ETFs?
– Exchange-Traded Funds trade like stocks.
– Managed by providers like iShares, SPDR, and Vanguard.
– Examples: pros price SPDR S&P 500 ETF (SPY), iShares MSCI Emerging Markets ETF (EEM), Invesco QQQ for Nasdaq 100.
## Key differences
– **Trading flexibility:** ETFs can be traded intraday, while index funds settle at day’s end.
– **Costs:** Both are low-fee, but ETFs may have lower expense ratios.
– **Accessibility:** Index funds may have minimum investment amounts; ETFs can be bought with small sums.
## Which is better?
– Index funds: great for retirement accounts and automatic contributions.
– Easier to access globally.
**Conclusion**
Both ETFs and index funds are powerful, low-cost tools. Investors often hold Vanguard index funds and SPDR ETFs together, gaining diversification, liquidity, and efficiency.
