| Taking it individually ETFs and Mutual Funds have | | | | made up of a basket of investments designed to |
| their advantages, with each having their | | | | reflect performance of its holdings. The way |
| disadvantages as well. Exchange-Traded Fund or | | | | these are bought and sold is where there is a |
| ETF for short is an umbrella of stocks or bonds | | | | major difference between ETFs and mutual funds. |
| that trade on the stock market at a set price, | | | | ETFs characteristics in trading is similar to stocks |
| just like any common stock. Since 1993, ETFs | | | | with share prices fluctuating throughout the day |
| have been traded in the US and since 1999 in | | | | the markets stay open allowing an investor to |
| Europe. They have grown considerably from the | | | | trade multiple times a day. Whereas mutual funds |
| recorded 32 in the US Markets in 1999. There are | | | | and index funds can trade only once a day. |
| now about a 1000 available to date. They are | | | | The fee structure is the other marked difference. |
| traditionally index funds and in 2008 were | | | | ETFs are transparent and have a very |
| authorized by the US Securities and Exchange | | | | straightforward expense ratio, while Mutual funds |
| Commission as actively-managed ETFs. | | | | may a number ways to charge an investor. |
| Even though they are funds that are traded on | | | | ETFs have a few advantages over mutual funds. |
| an exchange, Closed-end funds are not considered | | | | Some of them are low ownership costs, tax |
| to be ETFs. | | | | advantages, liquidity, and no minimum investment |
| Mutual funds on the other hand have been in | | | | requirement and many options. |
| existence for quite a long while in comparison to | | | | The disadvantages are also present with trading |
| ETFs. Serving the average investor for decades, | | | | costs varying widely, slippage, brokerage, and |
| mutual funds are known to have been established | | | | dividend drag. |
| around 1924. Similar to the ETF a mutual fund is | | | | |