• In mutual funds, the AMC acts as counterparty to the investor. Investors do their buy / sell transactions with the AMC whereas ETFs are listed on stock exchanges like shares. Investors can buy or sell ETFs in the stock exchange at a real time price.
• Mutual fund NAVs are priced at the end of the day. However, just like shares, ETF prices change real time throughout the day based on demand and supply in the market.
• You can invest in mutual funds directly through AMC or through an AMFI certified mutual fund distributors (MFD). However, to invest in ETFs, it is mandatory to have a demat and trading account with a stock broker.
• ETFs do not aim to create alpha over the benchmark index that it tracks; it aims to replicate the returns of the benchmark index.
• Being passive funds, the ETF expense ratios are much lower compared to actively managed mutual fund schemes.