Learn · Explainer

Index funds vs. ETFs

The difference between an index strategy and an ETF share structure, with definitions from the SEC and from BlackRock's 10-K.

Index versus active

BlackRock's 2025 10-K draws the line clearly. Long-term product offerings include active and index strategies. Active strategies, the 10-K says, seek to earn attractive returns in excess of a market benchmark, using research and models; index strategies, in contrast, seek to closely track the returns of a corresponding index, generally by investing in substantially the same underlying securities within the index, or in a subset of those securities. That distinction is about how the portfolio is run, not about how an investor buys the shares.

Mutual funds versus ETFs

An SEC guide for investors describes a mutual fund as an SEC-registered open-end investment company that pools money from many investors. Investors buy shares from the fund and redeem them with the fund. Mutual funds sell and redeem their shares at the net asset value, or NAV, calculated after the order is placed, typically after the major U.S. exchanges close. The investor does not know the exact price until that NAV is struck.

A separate SEC investor bulletin on ETFs states that ETFs are not mutual funds, and that, unlike with mutual-fund shares, retail investors can only purchase and sell ETF shares in market transactions. Only authorized participants (typically large broker-dealers) may buy and redeem shares directly with the ETF, and only in large blocks. Everyone else buys and sells on the exchange, at a market price that may differ from NAV. The bulletin is general educational material from the SEC, not a description of any one fund.

BlackRock's 10-K reports $5.5 trillion of iShares ETF assets under management as of December 31, 2025, and says the company offers both index-tracking ETFs, which seek to replicate the performance of a specific index, and active ETFs. That last point is the overlap in a sentence: an ETF can follow an index, or it can be actively managed.

How the two ideas combine

• An index mutual fund tracks an index, but is still bought and redeemed at end-of-day NAV.
• An index ETF tracks an index, and its shares trade during the day on an exchange.
• An active ETF trades on an exchange, but the portfolio is run to an objective other than matching an index.
• Costs, tax treatment and how closely a fund tracks its index vary from fund to fund. Those details are in each fund's prospectus, not in a company's 10-K.

This page explains the structures and the words companies and the SEC use for them. It is not a comparison of particular funds, and it is not advice about whether or how to invest in any of them.

More in Learn and Tools · Methodology & Disclosures explains where every number comes from.