Comparison guide
ETF vs Mutual Fund — Liquidity, Cost & Tax Compared
ETFs and index mutual funds track the same benchmark — but the wrapper changes cost, liquidity and tax behaviour.
// cost
ETFs: 0.05–0.10% TER. Index mutual funds: 0.10–0.30% TER. For very large corpus, ETFs can save 5–20 bps a year.
// liquidity
ETFs trade intra-day at market price (sometimes with bid-ask spread > NAV/iNAV). Mutual funds transact at end-of-day NAV without spreads. For SIPs, mutual funds win; for one-shot large deployments, ETFs win.
// tax treatment
Identical — equity ETFs and equity index MFs follow the same STCG/LTCG rules. The wrapper does not change tax.
// frequently asked questions
Yes — ETFs trade on the exchange and must be held in Demat. Index mutual funds can be held via folio without Demat.