How is an ETF different from a mutual fund?

There are many options for investors in the stock exchange market and it will need a proper detailing and educating of the prospective investor to enable him or her find his way through this crowd of options. The debate between exchange traded funds and mutual funds is age long and have drew diverse reactions from different portfolio managers. The bottom line that it will the preferences of the investor determines which of the funds fit him or her better , although exchange traded funds may offer added advantage. SIMILARITIES Before we delve into the differences between both funds, checking out their similarities will be helpful. One striking similarities between both funds is that, they are less risky than investing in individual stocks . This is because they come with an inbuilt diversification, as one fund can include many individual stocks so that if any of the individual stock is not performing fine, the other has a chance of doing fine. This mitigates the overall risk. ETFs and mutual funds investments gives you are wide variety of investment options , either broadly in a total market fund or narrowly in a sector fund. These funds are managed and monitored by experts, having you the time and effort that would have been expended in individual stocks.¬†More details.¬† DIFFERENCES Exchange traded funds trade throughout the trading day like stocks, while mutual funds only trade at the end of the day at net asset value (NAV) price. This means that any trading on a mutual fund will be effected after the close of the trading day and not the price when the trading occurred. This may not bother a long term investor but for a tactical investor whose goal is to better his entry and exit points as to make more return on investment,…

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