What is the difference between ETFs and Mutual Funds?

Question

Which one should I go for? I am interested in high yield and yet, I dont want to pay unnecessary commissions.

Where should I be looking?

Answer 1

ETFs and mutual funds are very similar in that they are both diversified and less riskier than stocks.  However, they do have some key differences.  ETFs track an index or certain industry sector.  On the other hand, mutual funds can be any collection of stocks or bonds chosen by a professional.  Both of them can yield high returns in the long run, but if you are hoping to keep more of your profits and avoid unnecessary commissions, I would suggest going with ETFs.

The fees associated with purchasing a mutual fund are usually higher than that of purchasing a stock.  Meanwhile, the commission rates for ETFs are the exact same as those of stocks.  In addition, mutual funds will incur capital gain taxes while ETFs will not.  To learn more about ETFs and mutual funds, I would suggest visiting Investopedia ( http://www.investopedia.com/ ).

When you do decide to invest in either ETFs or mutual funds, you will need a brokerage account.  If you are interested in low commission rates, I would suggest Firstrade ( http://www.firstrade.com/ ).  They are cheaper than most big name brokers such as Etrade, Scottrade, Ameritrade, and Schwab.  You should definitely check them out.

Answer 2

Well check out in your country what is the tax system.They might deduct some of your earnings from Mutual funds. No idea about tax on ETFs.But these days generally all withdrawals have it.

Answer 3

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Answer 4

ETF's are by design invested in almost every company in the sector that they cover. In a mutual fund a manager and his/her staff research companies in the sector and pick and choose for you... you SHOULD get better results through a mutual fund.

If you are investing in index funds, or in countries or regions, the results of either should be pretty close.

The difference in the trading aspects of the two should not make much difference if you consider yourself an investor...if you think you're going to trade  constantly, that's a different story.

Answer 5

ETFs are similar to mutual funds in terms of their behavior, however, with ETFs you can buy and trade them like stocks, as opposed to mutual funds you cannot trade them.

So with EFTs, if the market witnesses a bump and your specific ETF is worth more, you can sell off some shares to take profits, or, if the market slides and your ETF drops, you can either buy more shares to lower your cost per share, or you can exit.

Again, ETFs are mutual funds that trade like stocks.

Answer 6

Are you investing one big lump sum or throwing $100 bucks in a month or such? If you are putting in $100 at a time go for a non loaded mutual fund directly through the company and you can be on ACH,auto deposit,etc.. having no expenses on buying where as ETF's will have a $5-$15 dollar brokerage fee through discount online sites and that will HURT!

If your in a taxable account you might want to go for growth instead of yield as uncle sam will ravage it.

If you just inherited $50,000 from your aunts pet kitty cat's pet life insurance policy just make your own stock mix. Good time to buy,bad time to own.

Answer 7

ETFs are more liquid, trade intraday and have more liquidity as a result.

Mutual Funds are the ultimate buy and hold, but with less liquidity (traded end of day only) so it is harder to move out if the market is disrupted in a volatile way during trading hours.

Both can be compared for performance against peers, but the Mutual Funds' returns are more dependent on the fund manager. The ETF funds are more dependent on the Market/Sector/Companies included

Answer 8

alot