Mutual Funds · Category
Explore & investIndex Funds & ETFs
Funds that copy an index instead of trying to beat it. Low cost and transparent — and only as good as the index they follow.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
At a glance
- Who typically explores it
- Typically explored by investors who want market returns at low cost without choosing a fund manager, and by those building a simple core portfolio.
- Time horizon
- Follows the underlying asset: five years or longer for equity indices. Target-maturity debt index funds are designed to be held until their maturity date.
- Volatility
- Identical to the index tracked. A passive fund does not cushion falls — it follows the index down as well as up.
A general description of the category. Individual schemes differ — read each scheme’s documents.
Understand
01Index Funds & ETFs
What passive funds are
An index fund buys the securities of a chosen index in the same proportions, and adjusts when the index changes. An ETF does the same but trades on a stock exchange like a share. Neither tries to outperform; both aim to deliver the index's return minus costs. Under SEBI's 2026 framework they sit in the "other schemes" group, alongside fund-of-funds.
02Index Funds & ETFs
Index fund or ETF?
| Index fund | ETF | |
|---|---|---|
| How you buy | From the fund house, at the day's NAV | On an exchange, through a broker and demat account |
| Price | Once a day | Live market price through the day |
| SIP | Straightforward | Possible through some brokers |
| Watch for | Expense ratio, tracking difference | Expense ratio, trading volume, bid–ask spread |
03Index Funds & ETFs
What separates one passive fund from another
- The index. A broad index of the largest companies behaves very differently from a mid-cap, sector or factor index (momentum, low volatility, equal weight). Choosing the index is the real decision.
- Cost. With the strategy fixed, the expense ratio is one of the few things that varies.
- Tracking. Tracking error shows how closely daily returns follow the index; tracking difference shows the gap over a period. Smaller is better.
- Liquidity (ETFs). A thinly traded ETF can trade away from its underlying value. Look at volumes and the indicative NAV.
Passive funds also exist for debt — including target-maturity funds that hold bonds maturing around a set date — and for gold and silver.
Ideas to know
How gains are taxed
Index Funds & ETFs: tax in brief
Follows the underlying assets. Equity index funds and ETFs are taxed like equity funds. Debt index funds bought from April 2023 are taxed at your slab rate. Gold and silver ETFs and funds have their own holding-period rules. Tax rules change and depend on your circumstances. This is general education, not tax advice — check the latest provisions or speak to a tax professional.
Schemes in index funds & ETFs
Live scheme data isn’t connected yet
Before you decide
Risks to understand
Market risk
You receive the index’s full fall in a downturn — there is no manager trying to limit it.
Tracking risk
Costs, cash holdings and index changes mean returns can lag the index.
Index concentration
Some indices are dominated by a few companies or sectors, so "passive" does not always mean diversified.
Trading risk (ETFs)
Low trading volumes can mean wide bid–ask spreads and prices that differ from the underlying value.
The riskometer, SIPs and common questions
Related
Plan for it
Other categories
Next step
Small decisions compound.
Model a SIP with your own assumptions, size the goal it’s for, or talk to a CompoundX expert about how this category fits what you already own.
Disclosures
Mutual fund investments are subject to market risks, read all scheme related documents carefully.
Past performance may or may not be sustained in future. Calculators and illustrations on this site use hypothetical assumptions; actual returns may differ.
[To be confirmed by Compliance] Mutual-fund onboarding, KYC and transaction execution are processed through the platform of our investment platform partner, AssetPlus. CompoundX provides education, tools and relationship management, and does not hold client money or units. Registration details, where applicable, are listed on our Disclosures page.
Partner: AssetPlus · Investment platform
CompoundX works with AssetPlus as its investment platform partner. When you choose to invest in mutual funds through CompoundX, account opening, KYC and transaction execution are processed through AssetPlus' platform, which connects to the asset management companies, registrars and other market infrastructure involved.
CompoundX provides the education, financial tools, goal planning and relationship management around those investments. CompoundX does not hold client money or mutual-fund units. [To be confirmed by Compliance]
Registration details for CompoundX and its partners, where applicable, are listed on our Disclosures page.
Risk disclosure
Market-linked investments involve risk, including the possible loss of the amount invested. Past performance does not indicate future results, and the value of investments and the income from them can go down as well as up.
Deposits, bonds and other fixed-income products carry credit, interest-rate and liquidity risks; returns depend on the issuer honouring its obligations. Insurance is a contract of protection, not an investment. Read every offer document, scheme information document and policy wording carefully before you decide.