There was a time when mutual funds were considered the best to invest. People from all walks of life were taking much interest in that. However, since the arrival of Efts in the market, the whole equation has been changed. There is a lot more difference between these two and due to which people became more attentive towards ETFs than mutual funds. Today in this article, we will get to know some of those major differences. Let’s have a look at them.
In both the mutual fund and the trade ETFs, we give our money to a company and that company invests that money in some other projects. The way of dealing with money is not the same in both the different types of investment. In mutual funds it is a type of active money management and in the case of ETFs, it is passive money management or investment. Here active money investment or management means to search any specific company and then invest into that while passive money investment or management means to invest in any group of companies with a single investment without searching for any other option for investment.
Above we got to know that in a mutual fund company invest in some specific company. To invest in that company, it has to work out and do much research, which costs more altogether. On the other hand, in ETFs, they do not search for any specific company and they just invest in any basket of some companies. Thus they have not to do any extra work. Thus the fee in ETFs is a bit lower than the fee in the mutual fund. This fee is also called the Expense ratio.
There are mainly two types of mutual fund investment and three types of ETFs investment. The three types of ETFs investment are grantor trusts, exchange-traded open-end trusts and unit investment trusts.
In exchange-traded funds, you get more flexibility to control the trade than the mutual fund This is because mutual funds are traded once per day and that is too at the end of the day while closing the trade. The case of exchange trade is very different. Here in the ETFs, you can control the trade at any time of the day without any restriction.
Above we discussed some of the major differences between mutual funds and ETFs. Along with these differences, there are some similarities between them too. To know all about them, you may read our other articles which you can easily find on our website. If you want to know more stock information, you can check at https://www.webull.com/quote/rankactive.