ETFs can be purchased continuously throughout the trading day while index funds can only be

bought or sold at the end of the day. This is because ETFs are traded on a stock exchange like stocks,

while index funds are traded directly with the fund company like mutual funds. This difference gives

ETFs more liquidity and flexibility than index funds, as investors can buy and sell ETFs at any time

during market hours at the prevailing market price. Index funds, on the other hand, are priced only

once a day at the end of the day based on the net asset value per unit (NAVPU) of the fund. Both

ETFs and index funds are prone to tracking errors (A), which are the differences between the

performance of the fund and the performance of the underlying index. Tracking errors can be caused

by various factors, such as fees, expenses, dividends, rebalancing, and market conditions. The market

price of ETFs does not always match the underlying basket of securities ©, as it is determined by

supply and demand in the market. There can be a discrepancy between the market price and the

NAVPU of an ETF, which is called the premium or discount. Index funds, on the other hand, are priced

based on the NAVPU of the fund, which reflects the value of the underlying securities. Both ETFs and

index funds have management fees (D), as they are both types of mutual funds that incur costs for

managing and operating the fund. However, ETFs usually have lower management fees than index

funds, as they are more passive and have lower turnover and distribution costs.