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If ETFs are able to dodge taxes that mutual funds cannot, why do people still invest in mutual funds? Different risks?
by intopieces 8y ago
If ETFs are able to dodge taxes that mutual funds cannot, why do people still invest in mutual funds? Different risks?
- greenyoda 8y agoOne disadvantage of an ETF is that you have to pay a brokerage commission each time you trade it. Many mutual funds have no fees for buying/selling shares. If you have a savings strategy like automatically investing a percentage of every paycheck, the commissions on ETF trades could add up quickly.
- loeg 8y agoBrokerage commissions are $0 for Vanguard ETFs in a Vanguard brokerage or Fidelity ETFs in a Fidelity brokerage, etc. This isn't a real downside unless you want to trade ETFs in a brokerage account unaffiliated with the ETF.
- loeg 8y agoETFs only trade interday; mutual funds only trade end of day. It can be more convenient to automatically invest some portion of your pay in a mutual fund than an ETF. (Also, Vanguard mutual funds are shares classes of their ETFs, so they have the same tax benefit ETFs do here.)
- twiceaday 8y agoYou can buy fractional shares of mutual funds. Vanguard only lets you auto-invest on a schedule into mutual funds. Mutual funds trade once a day, at the end of the day, for the intra-day-valume-based average cost so you are not timing the hour.