Index funds vs mutual funds-Which is best?

There are usually three main differences between index funds and mutual funds which are listed below:

Active vs. Passive investment strategy: Mutual funds are the one which is actively managed by the fund managers. They invest in the assets which are finalized after a lot of research by analysts. While index funds track the performance of an index and invest in the companies listed in indices.

Cost of investment: As the mutual funds are actively managed, it has high investment cost which can also dip your returns. However, index funds just track the indices and do not require so much human efforts, they have lower investment fees and therefore, shareholders can receive more returns.

Goals: Mutual fund seeks to outperform the market while index funds simply mirror the performance of the index they follow. Mutual funds in a strategic manner select the investments that will yield higher returns than benchmark.

All the mutual funds are index funds because they follow some or other indices as their benchmark. So, you can invest in any of them by analysing your goals, risk appetite and returns.