{"concept":{"id":24,"slug":"index-fund","term":"Index fund","shortDefinition":"An investment fund that tracks an index, just like an ETF, but is bought and sold once a day at its net asset value, not in real time like an ETF.","longDefinition":"An index fund pursues the same goal as an ETF tracking the same index -- matching its performance -- but it doesn't trade on an exchange. It's bought and sold directly through the fund's management company (or a broker acting as an intermediary), at a single price calculated at the end of the day -- the net asset value (NAV) -- with no ability to choose the exact price during the day, unlike an ETF. It typically makes recurring automatic contributions of any amount easy, without the trading cost of each individual ETF purchase on an exchange."},"relations":{"requirement":[],"contrast":[{"concept":{"id":23,"slug":"etf","term":"ETF","shortDefinition":"An exchange-traded fund that pools many assets into a single product, usually tracking an index -- bought and sold like a stock.","longDefinition":"An ETF (Exchange-Traded Fund) is an investment vehicle that pools many assets -- usually the same ones that make up a stock market index, in similar proportions -- into a single product. Instead of buying each asset separately, buying one share of an ETF gives you exposure to all of them at once. Unlike a traditional fund, an ETF trades on an exchange: it has a price that moves in real time during market hours, and it's bought and sold using the same order types as a stock, through a broker."}}],"related":[{"concept":{"id":26,"slug":"investment-fund","term":"Investment fund","shortDefinition":"A vehicle that pools money from many investors to invest jointly in a portfolio of assets, managed by a professional management company.","longDefinition":"An investment fund pools money from many investors to invest it jointly in a portfolio of assets, managed by a professional management company. An index fund (already covered) is one specific case of an investment fund that follows passive management -- but not all funds work that way: management can be active or passive, depending on whether a management team makes ongoing decisions about what to buy or simply tracks an index."}}],"calculatedBy":[]},"curricularPosition":[{"id":21,"moduleId":7,"slug":"etf-vs-index-fund","title":"How does an ETF differ from an index fund?","summary":"You distinguish an ETF from an index fund: both track an index, but with different buying/selling mechanics and liquidity.","bodyMarkdown":"## Objectives\n\nBy the end of this lesson you distinguish an ETF from an index fund: both track an index, but with different buying/selling mechanics and liquidity.\n\n## Content\n\nAn index fund pursues the same goal as an ETF tracking the same index: matching that index's performance as closely as possible. The difference isn't in what they track, but in how they're bought and sold.\n\nAn index fund doesn't trade on an exchange. It's bought and sold directly through the fund's management company -- or a broker acting as an intermediary with it -- at a single price calculated at the end of the day, called the net asset value. This means that if you send a buy or sell order during the day, you won't know the exact price it will execute at until that net asset value is calculated at the end of the trading session.\n\nAn ETF, on the other hand, can be bought and sold at any time during market hours, at a price that varies continuously -- the same logic already covered for stocks.\n\nAnother common, though not universal, difference is how recurring contributions are handled: index funds usually make it easy to set up automatic recurring contributions of any amount, without the trading cost that each individual ETF purchase on an exchange carries. Neither vehicle is better in absolute terms -- the choice depends on whether real-time trading flexibility (ETF) or the convenience of frictionless automatic recurring contributions (index fund) matters more to you.\n\n## Example\n\nIf you want to be able to sell immediately at a specific point during the day because the price has risen, an ETF lets you do that. An index fund, on the other hand, would only give you the closing price calculated at the end of that trading session, not the price you saw at that instant.\n\n## Common mistakes\n\n- Thinking \"ETF\" and \"index fund\" are synonyms because both track an index -- the buying/selling mechanics and the moment the price is set are different.\n- Assuming one of the two is always better than the other -- the choice depends on whether real-time trading flexibility or the convenience of automatic recurring contributions matters more.\n\n## Summary\n\nAn ETF and an index fund can track the same index, but an ETF trades on an exchange in real time, while an index fund is bought and sold once a day at its net asset value.\n\n## Self-check\n\nWhy can an ETF sell at a different price at two different points in the same day, while an index fund can't?\n\nWhat practical advantage do index funds usually offer over ETFs for recurring contributions?","bodyHtml":"

Objectives

\n

By the end of this lesson you distinguish an ETF from an index fund: both track an index, but with different buying/selling mechanics and liquidity.

\n

Content

\n

An index fund pursues the same goal as an ETF tracking the same index: matching that index's performance as closely as possible. The difference isn't in what they track, but in how they're bought and sold.

\n

An index fund doesn't trade on an exchange. It's bought and sold directly through the fund's management company -- or a broker acting as an intermediary with it -- at a single price calculated at the end of the day, called the net asset value. This means that if you send a buy or sell order during the day, you won't know the exact price it will execute at until that net asset value is calculated at the end of the trading session.

\n

An ETF, on the other hand, can be bought and sold at any time during market hours, at a price that varies continuously -- the same logic already covered for stocks.

\n

Another common, though not universal, difference is how recurring contributions are handled: index funds usually make it easy to set up automatic recurring contributions of any amount, without the trading cost that each individual ETF purchase on an exchange carries. Neither vehicle is better in absolute terms -- the choice depends on whether real-time trading flexibility (ETF) or the convenience of frictionless automatic recurring contributions (index fund) matters more to you.

\n

Example

\n

If you want to be able to sell immediately at a specific point during the day because the price has risen, an ETF lets you do that. An index fund, on the other hand, would only give you the closing price calculated at the end of that trading session, not the price you saw at that instant.

\n

Common mistakes

\n\n

Summary

\n

An ETF and an index fund can track the same index, but an ETF trades on an exchange in real time, while an index fund is bought and sold once a day at its net asset value.

\n

Self-check

\n

Why can an ETF sell at a different price at two different points in the same day, while an index fund can't?

\n

What practical advantage do index funds usually offer over ETFs for recurring contributions?

","sortOrder":2,"readingMinutes":6,"difficulty":"Básico","url":"/en/academy/fundamentals/etfs/etf-vs-index-fund"}],"graphSummary":{"root":{"type":"concept","id":"24","depthFromRoot":0,"entity":{"type":"concept","slug":"fondo-indexado","term":"Fondo indexado","excerpt":"Fondo de inversión que replica un índice, igual que un ETF, pero se compra y se vende una vez al día a su valor liquidativo, no en tiempo real como un ETF."}},"depth":1,"returnedNodes":1,"truncated":false,"hasCycle":false,"nodes":[{"type":"concept","id":"24","depthFromRoot":0,"entity":{"type":"concept","slug":"fondo-indexado","term":"Fondo indexado","excerpt":"Fondo de inversión que replica un índice, igual que un ETF, pero se compra y se vende una vez al día a su valor liquidativo, no en tiempo real como un ETF."}}],"edges":[]},"relatedNews":[],"relatedEntities":[]}