The Difference Between Mutual Funds and ETFs

If you’re wondering what an ETF is (if you aren’t sure exactly what that is), then you may want to read this article in its entirety. In this article we will discuss what an ETF is, how they work, and why investing in ETFs can be a good fit for any investor. After reading this article you should know what an ETF is, how an ETF works, and why investing in ETFs makes sense for you. After reading this article you should have a better understanding of what an ETF is, how they work and why investing in ETFs makes sense for you.

An exchange traded fund is an individual investment vehicle managed by a professional trader. While most mutual funds are sold on centralized exchanges, ETFs can be traded via various marketplaces including Over The Counter (OTC) like E-Trade and TradeKing. ETFs function much in the same way as mutual funds; however, they are traded and held differently. The main difference between the two is that most mutual funds require the investment securities (the “fund” part) to be traded on exchanges where they can be bought and sold and also managed by a professional broker.

Investors in ETFs do not need to buy securities on exchanges in order to purchase ETF units. Instead, they can purchase ETFs from anywhere there is an internet connection. Because ETFs trade on national exchanges, they have more available trading opportunities and are much more liquid than mutual funds. This means that ETFs offer investors the opportunity to buy and sell large amounts of stocks in a short period of time, rather than having to wait hours or even days for the delivery of their shares. This is in contrast to mutual funds, which allow only a small percentage of the total stock shares to be traded. This can make ETFs a good choice for long-term investments as they offer high liquidity and low cost.