3 ms·
The distinction isn't so much mutual funds vs ETFs, as active vs passively managed funds. There are actively managed ETFs with gigantic fees just like there are
by the_gastropod 8y ago
The distinction isn't so much mutual funds vs ETFs, as active vs passively managed funds. There are actively managed ETFs with gigantic fees just like there are actively managed mutual funds with gigantic fees.
The primary differences between ETF's and mutual funds are:
- You can invest any amount of money into a mutual fund (above some initial minimum), where ETF's require you to purchase a whole number of shares.
- ETFs can be traded like stocks. Intraday trading works just fine. All mutual fund trades get executed typically once or twice per day (before opening / after closing hours). For long term investors, this difference is pretty unimportant.
- hunter2_ 8y agoDifferent transaction fees, too. On Schwab IRAs for example, there is a whitelist of mutual funds and ETFs with no fee to buy/sell (including their own funds, which have really good expense ratios for passively managed, like .02% for SWPPX) but ones not on that list are a typical few-dollars commission for ETFs but many-tens-of-dollars for mutual funds.
- hartator 8y agoTax treatment is different. You pay capital gains every year on mutual funds while you paid only on transactions wirh etf.
- the_gastropod 8y agoOnly if the fund manager sells assets. In index funds, that pretty much never happens.