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The expense ratio is only part of what an index product costs. An index fund transacts at NAV; an ETF crosses a bid-ask spread on every purchase. Enter your own holding period and instalment to see which is actually cheaper for you — and when they change places.
At a 0.03% spread, the ETF’s lower fee takes about 1.4 years to pay back what the spread costs to get in. Below that the index fund is cheaper; above it the ETF is. The fee saving is charged on the whole balance every year, while the spread is charged only on each new instalment — so the spread’s share shrinks as the portfolio grows.
Recovered from daily high/low/close using Corwin–Schultz (2012) and Abdi–Ranaldo (2017). These are estimates, not quoted spreads.
Detected across 1133 passive products on 39 indices. 98 fund houses run both structures on the same index; 2 have a published expense ratio on file for both sides.
SBI · NIFTY 50 SBI NIFTY INDEX FUND vs SBI Nifty 50 ETF | 0.25% → 0.04% | 6.25× | |
UTI · NIFTY 50 UTI Nifty 50 Index Fund vs UTI Nifty 50 ETF | 0.25% → 0.05% | 5.00× |
This is arithmetic on the assumptions you enter, not advice. No product is ranked as better and nothing here suggests buying, selling or switching. Cost is one input to a decision that also involves tax, liquidity needs and how you actually behave. Spreads are estimated from daily bars, not quoted, and expense ratios should be verified against the fund house’s own disclosure.
This calculator compares an exchange-traded fund against an index fund tracking the same index on TOTAL cost of ownership rather than expense ratio alone, and reports the holding period at which the cheaper of the two changes.
Total cost = expense ratio charged on the average balance + (half the bid-ask spread + brokerage, STT, exchange and GST) on every purchase and on the eventual sale + tracking difference. An index fund transacts at NAV and pays none of the transaction terms.
Input: Rs 10,000 monthly for 10 years: ETF at 0.04% with a 0.32% spread, index fund at 0.25%
Result: The ETF is cheaper overall, but only past roughly 3.9 years — below that the index fund wins despite charging six times the fee
Is an ETF always cheaper than an index fund?
No. The ETF usually has a much lower expense ratio, but it is bought on the exchange, so every purchase crosses a bid-ask spread and pays brokerage and STT. For short holding periods and frequent instalments those costs can exceed the fee saving. The calculator reports the exact holding period at which the two change places for your own numbers.
Why does the answer depend on my holding period?
The fee saving is charged on the whole balance every year, while the spread is charged only on each new instalment. As the portfolio grows past the annual contributions, the spread's share of it shrinks and the fee saving compounds on everything — so longer horizons favour the ETF.
Where do the spread numbers come from?
They are estimated from 250 sessions of daily high, low and close prices using the Corwin-Schultz (2012) and Abdi-Ranaldo (2017) estimators. They are estimates, not quoted spreads, and are cross-checked against traded value: a near-zero reading on a thinly traded ETF is reported as an upper bound rather than as a tight spread.
Should I compare the direct plan or the regular plan?
Direct. A regular plan's higher expense ratio is mostly distributor commission, so comparing it to an ETF measures the commission rather than the structural difference between the two products.
What is tracking difference, and why does it matter more than the fee?
Tracking difference is how far the product actually trailed its index, which absorbs the fee, cash drag, dividend handling and execution in one realised number. A fund charging 0.04% that trails by 0.45% is more expensive to own than one charging 0.25% that trails by 0.05%.