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Originally Posted by Machiavelli
Are index funds more similar to mutual funds or ETFs? What are your thoughts on index funds, and how do you choose ETFs?
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An index fund is where you buy an entire index, say the S&P 500. So when you watch the news and they get to the business section if they say the market was up today you made a little money, and if the markets were down you lost a little bit. You own it all.
Mutual funds are a collection of securities (stocks and bonds) and are managed by a fund manager. The manager decides what to buy and sell and when. These don't necessarily move the with markets depending on what they're holding and the decisions made by the manager.
An ETF is an exchange traded fund. So basically this is a vehicle that holds a collection of securities (maybe an index), that trades on an exchange. An index fund might be an ETF, but doesn't have to be. An ETF might be an index fund, but there are many, many varieties and thousands of options here.