# ETF vs Mutual Fund: Which Is Better for Indian Investors (2025)
A simple, practical comparison for Indian beginners. No jargon. No hype.
Both ETFs and mutual funds are investment funds that help you diversify.
But beginners get confused because they work differently—how you buy them, what fees you pay, and how quickly you can exit.
This guide breaks it down in the simplest possible way.
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Key Takeaways
- ETFs trade like stocks on NSE/BSE; mutual funds do not
- ETFs usually have lower fees
- Mutual funds allow automatic SIPs; ETFs require manual buying
- ETFs offer intraday liquidity; mutual funds settle at end-of-day NAV
- There is no universal "better" option—your choice depends on your behavior
- Most beginners find mutual funds easier to start with
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What is an ETF? (Quick Summary)
An ETF (Exchange Traded Fund) is a basket of stocks or bonds that trades on the stock exchange just like a regular stock.
- You need a demat account
- Price changes every second during market hours
- Example: A Nifty 50 ETF holds all 50 Nifty companies in one unit
It gives you diversification in a single trade.
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What is a Mutual Fund? (Quick Summary)
A mutual fund pools money from investors and buys stocks, bonds, or other assets.
- You do not need a demat account
- Buy/sell at end-of-day NAV, not live prices
- Example: HDFC Index Fund Nifty 50 tracks the same 50 companies but doesn't trade intraday
It's designed for simplicity and automation.
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Core Difference 1: How You Buy
ETF
- Bought on NSE/BSE via trading apps
- Requires demat account
- Price moves every second (9:15 AM–3:30 PM)
- Example: Buy at ₹150.23, sell at ₹152.45
- Brokerage is charged per trade
Mutual Fund
- Buy via AMC websites or apps (Groww, Kuvera, etc.)
- No demat needed
- All orders executed at 3:30 PM NAV
- No brokerage, but fund has an expense ratio
Meaning:
ETFs feel like trading.
Mutual funds feel like traditional investing.
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Core Difference 2: Fees
ETF
- Expense ratio: 0.05%–0.50%
- Example: Nippon Nifty BeES charges 0.05%
- Brokerage of ₹10–₹20 per trade
Mutual Fund
Expense ratio varies:
- Index funds: 0.20%–0.50%
- Active funds: 1%–2.5%
- Possible exit load if sold within 1 year
Meaning:
ETFs = lowest long-term cost
Mutual funds = higher ongoing cost but no brokerage
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Core Difference 3: Transparency
ETF
- Daily disclosure of holdings
- You always know what you own
Mutual Fund
- Monthly disclosure
- Fund manager strategy is not always visible
Meaning:
ETFs give more transparency than mutual funds.
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Core Difference 4: Liquidity
ETF
- Sell anytime during market hours
- Money settles in T+1
- Liquidity depends on trading volume
Mutual Fund
- Redeem at end-of-day NAV
- Money arrives in 1–4 days depending on fund type
Important Note:
Not all ETFs have good liquidity.
Stick to large ones like Nifty 50, Sensex, Bank Nifty, Gold ETFs.
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Core Difference 5: Management Style
ETF
- Almost always passive
- Tracks an index
- No stock-picking decisions
Mutual Fund
- Can be active or passive
- Active funds aim to outperform the index
- Passive index funds behave similarly to ETFs (but don't trade realtime)
Meaning:
If you want passive investing, both options work.
If you want active management, only mutual funds offer that.
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Which One Should You Choose?
Choose an ETF if:
- You already have a demat account
- You want the lowest fees
- You prefer intraday liquidity
- You're okay with manual monthly investing
- You invest larger amounts (brokerage becomes negligible)
- You understand tracking error and market-price variations
Choose a Mutual Fund if:
- You're a complete beginner
- You want automatic SIPs
- You invest small amounts (₹500–₹2000/month)
- You prefer "set it and forget it" investing
- You want active stock selection
- You don't want to deal with stock exchanges
Honest answer:
Most beginners should start with mutual funds.
After gaining confidence, they can switch to ETFs for lower fees.
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Bottom Line
There is no "better" product—only a better fit for your investing behavior.
- ETFs are cheaper, transparent, and fast
- Mutual funds are simpler, automated, and beginner-friendly
If you're starting out:
Index mutual funds are the easiest entry point.
If you're more experienced:
ETFs give lower cost and more control.
If you want active management:
Only mutual funds offer that.
Your behavior—not the product—decides your success.
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