ETF vs. mutual fund: Similarities and major differences - Business Insider

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ETFs and mutual funds can instantly diversify your portfolio, but they differ in how they're traded, managed and taxed. Here's what you should know.

Two crossed lines that form an 'X'. It indicates a way to close an interaction, or dismiss a notification.ETFs and mutual funds offer cost-efficient ways to diversify, but they differ in how they’re taxed, traded, and managed.

Mutual funds offer plenty of benefits, from their affordability to the fact that professionals do the research for you. They also help diversify risk: You buy a fund with many different assets to avoid getting burned if any individual asset loses its value. Mutual funds are intended to be long-term, buy-and-hold investments.that combines money from many investors into a pool to invest in stocks, bonds, and other assets.

are like any stock share price: continually changing throughout the day, based on buying and selling in the market. So they can be more volatile than mutual funds.For the last couple of decades, mutual funds have offered active money management: financial pros — fund managers, backed by analysts — who pick and choose investments, trying to deliver market-beating returns.

For example, in regards to equity mutual funds, the average expense ratio — as these fees are collectively called — is 1.24%,. All these fees add up and cut into the total return of the fund.

 

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