Mutual Fund vs. Exchange Traded Funds (ETFs)

A mutual fund allows you to pool your money, along with money collected by investors, to invest in stocks, bonds, and a variety of investments. Exchange traded funds (ETFs) are very similar, yet can also track specific indices, styles and sectors . Below are some key similarities and differences between mutual funds and ETFs.

• Mutual funds and ETFs are similar in that they provide a popular way to diversify portfolios with low-cost options when compared to investing in individual stocks and bonds.
• A mutual fund can only be traded once within a particular day, while ETFs can be bought and sold a number of times throughout the day, just like a stock. 
• Mutual funds are bought and sold based on specific dollar amounts, whereas ETFs are bought and sold based on market price.
• Mutual funds may require a specific amount of money to invest, whereas ETFs do not require a minimum amount when buying and selling.
• Mutual funds may incur greater capital gains distributions compared to ETFs. 
• Mutual funds can be actively or passively managed, while ETFs are passively managed. As a result, mutual funds have a higher expense ratio, while ETFs, in most cases, have a lower expense ratio. 
• Both mutual funds and ETFs incur fees from portfolio management and administration.

These are just some of the many similarities and differences between mutual funds and ETFs. Individual investors are encouraged to learn more about each option to decide which would be best for them and their particular interests and goals.