What is the difference between a mutual fund and an ETF (Exchange Traded Fund)?

A mutual fund and an ETF (Exchange Traded Fund) are both investment vehicles that allow individuals to invest in a variety of stocks, bonds, and other securities. Though they are similar in many ways, there are also a few key differences. A mutual fund is a professionally managed collective investment vehicle. Investors purchase shares in the fund, which is then used to purchase a portfolio of assets. The value of the mutual fund is determined by the performance of the assets it owns. Mutual funds are actively managed, meaning their managers are selecting and monitoring investments on an ongoing basis. An ETF is similar in that it is also a professionally managed investment vehicle. However, ETFs are passively managed funds. Instead of being actively managed, they are structured to track an index, such as the S&P 500. ETFs also have a lower annual expense ratio than mutual funds and are more liquid, meaning they are easier to buy and sell. In summary, the main difference between a mutual fund and an ETF is that mutual funds are actively managed, while ETFs are passively managed. Mutual funds also have higher annual fees, while ETFs usually have lower fees. Both types of investments can offer investors exposure to a variety of asset classes, but the choice of which is best for any given investor will depend on their individual goals and risk tolerance.

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What is the difference between a mutual fund and an ETF (Exchange Traded Fund)?

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