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Trans Difference Between A Fund And An Etf Ity . So, the key takeaway is that while index funds are passive, not all etfs are passive. However, the difference between these two investment products is wide. ETFs vs. Mutual Funds ETF Model Solutions® from www.etfmodelsolutions.com So, the key takeaway is that while index funds are passive, not all etfs are passive. The main difference between an etf and an index fund is the frequency of trading. Etfs are usually passively managed, while mutual funds are typically actively managed.