- Mutual Fund: A professionally managed investment fund that pools money from multiple investors to invest in a variety of securities (stocks, bonds, etc.).
- ETF: A type of investment fund traded on stock exchanges, much like individual stocks, which holds a collection of securities.
- Mutual Fund:Can be bought or redeemed only at the end of the trading day at the net asset value (NAV).No intraday trading.
- ETF:Trades like a stock throughout the day on exchanges at market prices.Prices can fluctuate throughout the trading day.
- Mutual Fund:Higher expense ratios due to active management.May have entry/exit loads (fees).
- ETF:Generally lower expense ratios.Brokerage fees apply for buying and selling (like stocks).
- Mutual Fund:Often actively managed by fund managers aiming to outperform the market.
- ETF:Mostly passively managed, designed to track an index (e.g., S&P 500).
- Mutual Fund: Requires a minimum investment amount (e.g., $500 or more, depending on the fund).
- ETF: You can purchase as little as one share, making it more accessible to small investors.
- Mutual Fund: Less tax-efficient due to capital gains distributions within the fund.
- ETF: More tax-efficient as investors trade shares among themselves, minimizing taxable events.
- Mutual Fund: Redeemed at the end of the trading day; not ideal for frequent trading.
- ETF: Highly liquid and suitable for active trading since they trade throughout the day.
- Mutual Fund: Holdings are disclosed quarterly or semi-annually.
- ETF: Holdings are disclosed daily, offering greater transparency.
- Choose Mutual Funds if:You prefer active management and long-term investing. You don’t need intraday trading.
- Choose ETFs if:You want lower costs and tax efficiency. You prefer flexibility and intraday trading options.
