If you’ve heard about exchange traded funds (ETFs) but aren’t loosening your grip on those mutual funds you own, read on.
Though they sound like similar products, ETFs and mutual funds differ in some very key respects.
Matt Krantz for USA Today reports on some of the most important differences:
- Intraday pricing: The value of the mutual fund is updated once a day, at the end of the day. ETFs, on the other hand, are bought and sold all day.
- Special commissions: Mutual funds can come with hefty investment minimums and early redemption fees. ETFs, on the other hand, have no such minimums or early redemption penalties. It’s also getting easier to find ETFs that trade commission-free, sweetening the deal.
- Lower fees: Not all ETFs charge lower fees than all mutual funds, but as a general rule, they do. Do a little cost comparison before you buy to make sure you’re getting the best price. [What You Should Know About ETF Expenses.]
- Variety: Although mutual funds exist in greater numbers, ETFs have the edge when it comes to variety. They’ve given ordinary investors the ability to invest in esoteric asset classes such as currencies and commodities. [Love ETFs? Learn More About Them.]
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.