The main difference is that index funds aim to mirror a stock market index's performance, whereas mutual funds seek to surpass the market by selecting top stocks and securities.
Index Mutual Fund
Index mutual funds track specific stock indices, aiming to replicate their performance by investing in the same stocks, offering a passive investment strategy with typically lower fees.
Mutual Funds
Mutual funds pool investors' money to invest in a diversified portfolio of assets, aiming to generate returns, but often have higher expense ratios.
Index Fund Vs Mutual Fund - Characteristics
Index funds aim to mirror a market index's performance, while mutual funds strive to outperform the market through actively managing a diversified portfolio.
Index Fund Vs Mutual Fund - Diversification
Both mutual funds and index funds can provide diversification by investing in a broad range of securities.
Index Fund Vs Mutual Fund - Level Of Risk
Index funds offer less risk due to broad diversification, while mutual funds carry higher risk, depending on the fund manager’s skill and portfolio quality.
Index Fund Vs Mutual Fund - Investment Performance
Index funds mimic market index for steady returns; mutual funds aim to outperform for higher potential returns.
Index Fund Vs Mutual Fund - Expense Ratio
Mutual funds typically have higher expense ratios than index funds because of the costs associated with active management.
To learn more about index and mutual funds, check out our blog.