What is the difference between a mutual fund and an exchange-traded fund (ETF)?

In Virginia, mutual funds and exchange-traded funds (ETFs) are both investments that allow investors to diversify their portfolios. But there are some key differences between the two. Mutual funds are managed by investment professionals who pool money from several investors. Mutual funds can invest in numerous stocks, bonds, or other investments, and the fund’s manager is responsible for supervision. Mutual funds typically have a higher minimum investment and charge a fee for management called the expense ratio. In contrast, ETFs track a basket of investments, such as an index or sector. An ETF is like a stock, so they are traded on the stock exchange and investors get to buy and sell them like any other stock. ETFs typically have lower minimum investments and have lower fee structures than mutual funds since there is no active management. So the primary difference between a mutual fund and an ETF is that mutual funds are actively managed, while ETFs do not involve any active management and track a basket of investments. ETFs typically have lower minimum investments and fees than mutual funds, making them attractive to investors who are looking to diversify their portfolios without having to pay high fees.

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What is the difference between a mutual fund and an exchange-traded fund (ETF)?

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