Index Fund vs ETF vs Mutual Fund: UK Guide
Three words new investors get told mean the same thing. They don't. One is a list, one is a structure, the third is a different structure. The rule that matters for your ISA.
OEIC vs ETF vs active fund - the differences UK investors care about
| Feature | Mutual fund (OEIC) | ETF | Active fund |
|---|---|---|---|
| Pricing | Once per day | Live in market hours | Once per day |
| Typical OCF | 0.13% - 0.25% | 0.07% - 0.25% | 0.50% - 1.50% |
| Minimum buy | £100 ish | One share (£5+) | £100 ish |
| Auto-invest | Excellent | Platform-dependent | Excellent |
| Tracks an index | If passive | If passive | No |
For most UK investors, pick the cheapest passive option your platform supports.
Key takeaways
An index is just a list of companies, like the FTSE 100. It is a measurement, not something you can buy.
An index fund is a fund that tracks an index. It can be structured as either an ETF or a mutual fund (OEIC in the UK).
ETFs trade on a stock exchange like shares. Mutual funds price once a day and are bought directly from the fund provider.
For long-term UK investors, the wrapper matters less than the cost. A cheap global tracker, in either format, beats nearly everything else.