Index funds in layman terms

I have seen Warren Buffett tell to buy and hold ‘low cost index funds’, what is the equivalent of that in indian context ? is it niftybees ?
Can someone explain the differences between index mutual funds and ETFS, niftybees etc etc. in layman terms ?

PS: I have read varsity content on index funds, but I cant seem to make out what ‘low cost index fund’ in indiamn context is.

NiftyBees, which tracks the Nifty 50 index, is one such example.

Index Mutual Funds:

  • Index mutual funds are designed to replicate the performance of a specific index, such as the Nifty 50 or Sensex.
  • Investors can buy and sell units of index mutual funds directly from the AMC at the Net Asset Value (NAV) of the fund.
  • These funds are priced at the end of the trading day, based on the closing prices of the underlying securities.
  • Index mutual funds are suitable for long-term investors who prefer a traditional investment approach and do not actively trade in the market.

ETFs (Exchange Traded Funds):

  • ETFs are similar to index mutual funds as they also aim to replicate the performance of a specific index.
  • However, ETFs are listed and traded on stock exchanges, so you can buy and sell ETF units throughout the trading day at market prices.
  • ETFs offer flexibility and liquidity, allowing investors to enter or exit positions anytime during market hours.
  • ETFs may have lower expense ratios compared to index mutual funds, making them a cost-effective option for investors.
  • Additionally, ETFs can be bought and sold through a demat account, similar to stocks.

Index mutual funds and ETFs track specific indices, but the main difference lies in their structure and trading method. Index mutual funds are bought and sold directly from the AMC at the NAV, while ETFs are traded on stock exchanges throughout the trading day. Due to their lower expense ratios, ETFs offer greater flexibility and potential cost savings. NiftyBees is a popular ETF in India that tracks the Nifty 50 index.

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