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Mutual Funds vs ETFs: Difference and Comparison

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Mutual funds

Mutual funds are an investment option which offers you to invest your money in the market for long-term (time), Mutual funds professionally managed investment platform for many investors to purchase securities like stock, bonds, money market instruments, and other assets and sell them too, Mutual funds pools money from the investors to buy usually stocks and bonds, Mutual Funds vs ETFs.

The performance of the mutual fund company depends on the securities which decide to buy. The price to sell a mutual fund is referred to as the net asset value (NAV), per share. There is a simple formula to count the Net Asset Value of a mutual fund share that is dividing total asset value minus maintenance charge by a total number of shares.

What is the exchange-traded fund (ETFs)?

Exchange-Traded Fund, also known as ETF. ETFs hold multiple assets, not only one like stock, Exchange Traded Funds holds multiple assets that are why ETFs are known for diversification. ETFs is not a long-term investment; it is short-term, high risks with great profit investment.

ETF getting up day by day and because of its diversification. It allows the investor to invest in multiple stocks. ETFs, offer investments in stocks, bonds, commodities, and currency.

Mutual Funds vs ETFs
Mutual Funds vs ETFs

MUTUAL FUNDS VS ETFs

The decision to choose to invest between Mutual Funds and Exchange Traded Funds (ETFs) while taking an investment decision. They both are quite different. Following are the differences between them:

Flexibility

  • Exchange-Traded Funds can be freely traded in the market and the decision-maker for bought and sell is the investor. The market price of fluctuating in real-time Mutual funds can be bought or sold by placing a request with the fund house The price indication of the mutual fund is Net Asset Value.

Management

  • ETFs have not required a high level of management. In the case of ETFs, funds are only stalked by the market index, this is the reason for less cost management required in Exchange Traded Funds. But some Exchange Traded need high-level management, there are expensive also. Mutual funds are needed a high level of management, which is managed by the fund managers who charge investors a good amount to manage their investment.

Charges

  • Exchange-Traded Funds are fairly low in charges like fees and expanse Exchange-Traded Funds do not need any management But in the case of Mutual Funds, the decision is not directly taken by the investor investment decision is taken by the fund manager This result, the mutual fund’s charges are higher.

Commissions:

  • In the case of Exchange Traded Funds, investors have to pay commission charges on sale and purchase of units as the prevailing rules. Mutual funds are good in this commission case, investors no need to pay commission for sale and purchase of stock, equities, etc.

Tenure

  • This term means the agreement time period for the investment. Exchange-Traded Funds do not have a minimum or fix time period for investing, Exchange Traded Funds are also for a short period of time whereas mutual funds take a specific amount of time like 3 years, 5 years, 10 years, etc. Equity Linked Savings Scheme comes with 3 years of tenure for the investor.

Factors On Which Have To Focus While Decide Between Mutual Funds And Exchange Traded Fund:

Which is better for you this only depends on you and no one better knows what is best for you. Both investment options are better, it depends on the category of investor. But before deciding your investment option some factor you have to consider:

  1. Your Risk level.
  2. Your investment time period.
  3. You want to save your tax or not.
  4. Which investment is easy for you to invest in.
  5. Your future financial goals.

If you successfully give the correct answers to the above factors then you will surely choose the best investment option for yourself. The decision, where you have to invest?  is surely yours but after taken careful consideration.

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