The ETFs Vs Mutual Funds

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The ETFs and mutual funds are very popular investment options for investors to take but we must understand that each has its own advantages and considerations . That is why it is important to understand the differences so that you can have a clear understanding of the one to choose for your portfolio. The ETFs offer what is called intraday trading flexibility and this has lower expenses ratio when you compare it to that of the mutual funds but you must understand that mutual funds offer active management and the ability to invest in fractional shares as well. This is a very good feature.

 

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Even though ETFs are a type of mutual fund, there are many differences between the two. In fact, an ETF is a mutual fund in the form of a collective investment contract whose investment units can be bought and sold in the primary market or secondary market. To invest in ETFs you need more capital than in mutual funds. In ETFs you have to buy at least 1 lot, whereas in mutual funds the minimum deposit is only $3. Investing in mutual funds through investment managers while in ETFs through participating dealers, brokers and securities. You can find out the prices in ETFs in real time, while in mutual funds you can find out the net assets at the closing of the stock exchange. Transaction fees in mutual funds are around 3%, while transaction fees in ETFs are according to the broker.