The average mutual fund expense ratio is about 1%, but it can be lower or higher. Index funds cost less than mutual funds in terms of expense ratios, but that gap is closing. Index funds have Passive retail investors often choose index funds for their simplicity and low cost to own. Typically, the choice between ETFs and index funds will come down to management fees, shareholder transaction costs, taxation, and other qualitative differences. Index funds are still mutual funds, arrangements in which you pool your money with other investors. And you still have an investment company that handles your transactions. The difference is that the investment company isn’t paying a fund manager and a team of analysts to try to cherry-pick stocks and bonds.