What is the difference between a mutual fund and an exchange traded fund?

A mutual fund and an exchange traded fund (ETF) are both types of investments. The primary difference between these two investment vehicles is how they are traded and the fees associated with them. A mutual fund pools money from investors, and then the fund company invests it in a variety of investments such as stocks, bonds, real estate, and other financial instruments. These funds are actively managed in an effort to generate a return on the investment. When investors want to buy or sell shares in a mutual fund, they do so directly with the fund company and the transactions happen once a day, at the close of the market. Mutual funds also typically have higher fees associated with them in the form of management fees and transaction fees. On the other hand, an ETF is similar to a mutual fund in that it holds a variety of investments. Instead of the fund company managing the investments, the ETF is passively managed and attempts to track an index such as the S&P 500. Investors can buy and sell shares in an ETF just like they would with a stock, buying and selling throughout the day on a stock exchange. ETFs also typically have lower transaction fees associated with them. In summary, the main difference between a mutual fund and an ETF is how they are traded, the fees that are associated with them, and the amount of management involved with each. Mutual funds are actively managed and traded once per day with higher fees, while ETFs are passively managed and traded throughout the day with lower fees.

What is the difference between a mutual fund and an exchange traded fund?

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