Investors, especially Singaporeans, are probably more familiar with Exchange Traded Funds (ETFs) than Index Funds. Both are known to track the indices and try to mimic the returns by investing into the index constituents closely. If they do the same job, why do they have different names? Let’s find out the differences…

#1 The Index Fund is the mother of ETFs

Vanguard is the champion of index funds and the brainchild behind it was John Bogle. He successfully revolutionalised the financial industry and made a lot more investors adopt index investing. He launched the first index fund on 31 December 1975. It tracks the S&P 500 Index. The first ETF was only launched on 22 January 1993, about 18 years later. The manager was State Street Global Investors and there’s no surprise that tracks the S&P 500 Index too. Today, BlackRock is the largest ETF manager by assets with their iShares brand of ETFs. Vanguard came to the ETF business later in...