What is the difference between an index fund and an ETF?

ETFs (Exchange-Traded Funds) trade on exchanges throughout the day like a stock; index mutual funds trade once per day at the closing price. Both can track the same index (e.g., S&P 500) at similar low costs. ETFs offer more flexibility and are often more tax-efficient. Index mutual funds can be easier for automatic investing. For most investors, either works well; the difference is minor.