Some key differences between ETFs and Mutual Funds

Jene J. Long

When we get some extra money in our hands, we usually want to invest that in any specific project which can give us a good result, without investing and more money. trade ETFs and mutual funds are two of the very popular ways to do so. Let’s know some of the key differences between them before we go invest in any particular field. After knowing them all, you would have a better idea and clarity about  your money and investment.

Active and passive management

Though both the ETFs trade and Mutual funds have a lot more similarities between them, there are some key differences between them. The very first difference between them is the difference in the way of asset management or investment. In Mutual funds, assets or funds are generally managed by the way of active management while if you will look closely, you will find it doesn’t happen the same in case of ETFs management. In ETFs trade, the ETFs are managed by active investment only by 0.2 per cent and about 99.9 per cent of ETFs are managed by passive investment.

Way of trading 

The 2nd very interesting difference between them is the way of trading. Generally, the trading at ETFs is done similar to any stock exchange. That means the ETFs can be sold and purchased the whole day. The same is not possible in the case of Mutual funds. It is mostly traded during the closing of the market at the night time. That is the reason, people who want to do the trade like buying and selling in a short period, mostly choose the way of trading through mutual fund trading.

Expense Ratio

This is the ratio or the charges paid to the company who is going to manage the money of investmemt in some project or some other companies. In Mutual funds, these charges are more as there, the funds are managed directly. The direct management of money makes it costlier. It ETFs trade, as we told already, the money is managed passively, which means they don’t bother more about finding any specific company. This makes this trade with less expense as instead of finding any specific company to invest, they invest in some basket of companies.

Above we got to know some of the key differences which can make our choice of choosing investment plan bit more economical and healthy. There are even more differences between these two, which you can know better only after investing any one of them and feeling the real difference. You can get more information like quote etflist at before investing.

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