Question

What is the difference between a mutual fund and exchange traded fund?

Answer 1

Mutual fund is a type of investment fund where money from different investors are pooled together and actively managed by fund managers aiming to give the maximum return for the given investor risk profile. It can only be redeemed at the end of the day.

Whereas in the exchange traded fund a diversified portfolio is being created (mostly according to some major index) by the fund manager and get them listed on the security exchange. It can be traded through out the trading hours, so it can be redeemed any time. It is not actively managed by the fund manager and hence it has the lower expense ratio.