An index fund is a type of mutual fund whose holdings match or track a particular market index. In this funds are invested in a broader market index – like the Sensex or the Nifty. For example if you have little knowledge about the investment or stock market and you want to invest in this index fund, then your funds will be invested in all the top companies of Nifty50 according to the holding of the particular company i.e. if a company has 49% capturing and other is 12% & more on, so your share of money will be divided accordingly.

An exchange-traded fund (ETF) is a type of investment fund and exchange-traded product, i.e. they are traded on stock exchanges. ETFs are similar in many ways to mutual funds, except that ETFs are bought and sold throughout the day on stock exchanges while mutual funds are bought and sold based on their price at day’s end.

So we can say ETF lies in between mutual fund and trading.

There are different rules, taxes & return policies you should read. If you want to invest & are confused then you should know in ETF investment you should have enough knowledge about market & the companies. & while you want to invest & learn & you are a beginner then index fund would be a safe option. Even Warren Buffett has also suggested to invest in this if someone wants to save money & have little knowledge of market.