Mutual funds and ETFs are both pooled investment vehicles, but they have important differences that may make one better suited to your needs.
Key Differences
- Trading: Mutual funds trade once daily at NAV; ETFs trade throughout the day like stocks
- Minimums: Mutual funds often have minimum investments; ETFs can be bought per share
- Costs: ETFs typically have lower expense ratios; mutual funds may have load fees
Which Is Better?
Both are excellent options. ETFs generally offer lower costs and tax efficiency, while mutual funds offer automatic investing and no need to place trades. Many investors use both in their portfolios.
