5) How does an index fund differ from an ETF?
An exchange traded fund, or ETF, is a type of fund which owns the underlying assets (stocks or gold) and divides ownership of those assets into shares. For example, a Gold ETF will buy actual gold. It is for this reason that it serves as a proxy to investing in gold. Or, for instance, iShares, the world's largest ETF provider, has an ETF called iShares S&P India Nifty 50 Index Fund, which tracks the S&P CNX Nifty Index.
In the case of an index fund, you can buy the units from the asset management company, or AMC, and sell them back to the AMC, based on the current net asset value, or NAV. In the case of an ETF, the units are listed and traded on the stock exchange. Which means that investors need to have a demat account to buy and sell ETFs. Unlike an index fund where the NAV is declared end of the day, an ETF could experience price changes throughout the day, depending on demand for the product.