Indian financial markets are rapidly progressing and offering alternative investment avenues to mobilize household savings into productive investments. Mutual funds and exchange-traded funds have emerged as important investment instruments providing benefits of portfolio diversification, professional expertise, high returns and liquidity. However, these funds have their own features, management criteria, cost structure, as well as risk and return profile. The present study focuses on the comparative analysis of both these funds to facilitate investors in making informed investment decisions in these funds. The study is mainly secondary data based. The paper highlights the types and composition of both funds, a comparison over different aspects and challenges faced in the Indian context.