Which is better ETF or Mutual Funds and are there any differences?
The industry is moving toward ETFs so that is where I would invest.
I just open a Fidelity account a few months back and they seem to favor mutual funds for some reason and that’s why I was asking the question, thanks.
I listed below some of the differences between ETFs and Mutual Funds. As noted by Butler, ETFs are becoming more popular. Whichever type of fund you choose, the important consideration is to consider investing in low cost index funds.
ETFs offer flexibility: they can be traded at any time during the day, Mutual funds can only be bought and sold at the end of the trading day.
ETFs tend to have (slightly) lower expense ratio compared to a fund companies similar mutual fund
ETF tend to have trading costs “bid/ask spreads”. Mutual Funds trade at “net asset value” so no bid/ask spread. For both ETFs and mutual funds, there may be a brokerage charge if you use company A’s brokerage but chose funds from company B.
Mutual funds typically come with a higher minimum investment requirement than ETFs.
ETFs tend to be more tax efficient. This is a consideration when investing in non-retirement accounts. Vanguard is an exception, their ETF and corresponding mutual fund have the same tax efficiency
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Well thank you for the info.
I’m at Fidelity and own no mutual funds
I’ve received the same advice, that I should purchase ETFs instead of mutual funds, from my fiduciary advisor. What I don’t understand is, if ETFs are so preferable, then why isn’t everyone purchasing them only? Why are people purchasing mutual funds?
My current portfolio with vanguard consits of mutual funds and a Target date retirement fund, as suggested by my previous Financial Engines advisor.
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