As markets remain volatile amid geopolitical tensions, central bank policy shifts, and global trade uncertainty, investors are reevaluating how they allocate their funds. Two of the most popular investment vehicles — Mutual Funds and Exchange-Traded Funds (ETFs) — each have unique benefits. The right choice depends on your investment goals, risk tolerance, and desire for flexibility.
According to the latest data from the Association of Mutual Funds in India (AMFI), inflows into equity mutual funds decreased by 14.4% month-on-month to Rs 25,082.01 crore in March, down from Rs 29,303.34 crore in February. This marks the lowest inflows in equity schemes in 11 months, despite the Sensex and Nifty both rising by 5.76% and 6.3% respectively in March.
Exchange-traded funds (ETFs) are now being seen as a compelling investment choice in India’s current market landscape, particularly for individuals seeking to initiate investments with limited capital and grow their wealth over the long term.
“Mutual funds and ETFs are both excellent options that can provide good returns for investment portfolios. However, they operate differently. ETFs (Exchange-Traded Funds) are traded on an exchange and can be bought or sold at live prices throughout the day. In contrast, mutual funds are priced only once a day, based on the net asset value (NAV) calculated at the end of the trading day. One of the simplest ways to build an investment portfolio is through mutual funds. This is because you don’t have to worry about choosing the right price to buy or sell; the NAV is automatically adjusted and updated every evening. Managing a mutual fund portfolio is generally easier than managing an ETF portfolio. With ETFs, you need to open a demat account, set up and place orders, and ensure your bank account is funded for purchases. When selling ETFs, you have to go through a similar process in reverse.
In my view, mutual funds have distinct advantages over ETFs, especially considering the relatively small cost difference. Therefore, mutual funds can be one of the best ways to invest in your portfolio,” said Anand K. Rathi, Co-Founder of MIRA Money.
Let’s compare mutual funds and ETFs
> Mutual Funds: Actively managed stability
Mutual funds are often managed by professional fund managers who actively select stocks or bonds with the aim of beating market benchmarks. This active management can help navigate volatile markets, especially when conditions are uncertain.
Why choose Mutual Funds now:
Professional management can help reduce downside during corrections.
SIP (Systematic Investment Plan) options allow for rupee cost averaging.
Good for investors looking for long-term wealth creation without active monitoring.
Especially suited for those who prefer active management over passive investing.
Drawbacks:
Higher expense ratios due to active fund management.
NAV (Net Asset Value) updated only once a day.
Some funds have exit loads for early withdrawals.
> ETFs: Low-Cost, Real-Time Trading
ETFs, by contrast, are passive investment instruments that track a specific index or theme (e.g., Nifty 50, gold, sector-specific indices). They trade like stocks on the exchange, offering intraday liquidity and lower costs.
Why consider ETFs now:
Low expense ratios, making them cost-effective for long-term investors.
Better for DIY investors who want full control over entry and exit.
Great for diversification in a single transaction.
Ideal for short- to medium-term tactical allocations, especially in uncertain markets.
Drawbacks:
Requires demat account to invest.
No SIP option (unless done manually through brokers).
No active downside protection in falling markets — it mirrors index performance.
Which should you choose right now?
If you’re looking for steady, long-term wealth creation with professional oversight, Mutual Funds (especially hybrid or balanced funds) may be a better fit.
If you’re cost-sensitive, comfortable with market tracking, and want flexibility to buy/sell quickly, ETFs are worth considering — especially for experienced investors or those building tactical exposure to sectors like gold, PSU banks, or global indices.