Exchange Traded Funds are, in fact, index funds listed and sold on markets such as shares. This was not possible before the advent of the ETFs.
Globally, both Individual and Institutional Money Managers have opened up a whole new panorama of investment opportunities for ETFs.
They enable investors to gain relatively easily, on a real-time basis and at a lower cost than many other forms of investment, wide exposure to entire
stock markets in different countries and specific sectors. An ETF is a share portfolio representing an index's composition, such as S&P CNX Nifty or BSE Sensex.
The exchange price of the ETFs is based on the net asset value of its underlying shares.
Think of it as a mutual fund that you can buy and sell at a price that varies throughout the day in real time.
Index Funds/ETFs :
Such mutual funds create a portfolio that emulates the index issued. Thus it is predicted that these funds will yield similar returns as per index.