Exchange Traded Funds vs Mutual Funds
There are differences between Exchange Traded Funds (ETF) and Mutual Funds. Foolishly speaking, they have different names, haven’t they? Here I list out some good links to help you further to get more elaboration on differences of ETF and mutual funds. What are the advantages and disadvantages between the two.
From Fool.com:
Mutual Funds: Traditional, actively managed mutual funds usually begin with a load of cash and a fund management team. Investors send their C-notes to the fund, are issued shares, and the Porsche piloting team of investment managers figures out what to buy. Some of these stock pickers are very good at this. The other 80% of them, not so much.
ETFs: ETFs work almost in reverse. They begin with an idea — tracking an index — and are born of stocks instead of money.
What does that mean? Major investing institutions like Fidelity Investments or the Vanguard Group already control billions of shares. To create an ETF, they simply peel a few million shares off the top of the pile, putting together a basket of stocks to represent the appropriate index, say, the Nasdaq composite or the TBOPP index we made up for the kick-off article. They deposit the shares with a holder and receive a number of creation units in return. (In effect they’re trading stocks for creation units, or buying their way into the fund using equities instead of money.)
While Investopedia.com says:
As with many financial decisions, determining which investment vehicle to commit to comes down to “dollars and cents”. Given the comparison of costs, the average passive retail investor will decide to go with index funds. For these investors, keeping it simple can be the best policy. Passive institutional investors and active traders, on the other hand, will likely be swayed by qualitative factors in making their decision. Be sure you know where you stand before you commit.
And Suze Orman stated that:
ETFs is a mutual funds for the 21st century
You may love to read all the details from them, here are the links:
1. Mutual Funds v ETFs
2. Mutual Funds vs. ETFs
3. ETFs Vs Index Funds: Quantifying The Differences
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do we have to open CDS account to invest in ETF fund?