Question

1.Name at least three differences between Mutual Funds and ETFs (Exchange Traded Funds)?

2.Which of the two (mutual funds vs ETFs) is a better tool for long term investing (such as retirement) and why?

Answer 1

1) i. Mutual funds are traded at closing net assets value whereas exchange traded funds are traded during trading day and value varies during this time.

ii. Mutual funds have minimum expenses specified whereas exchange traded have no minimum expenses specified.

iii. Mutual funds have more tax liabilities than exchange traded fund.

2) For long term investing both are better option as it depends upon investors objectives.

As ETF provides lower tax expenses than mutual fund. Further, ETF is traded on stock exchange than mutual fund. ETF are traded like shares & can be bought or sold without any restrictions.

ETF is better for the day traders. So, if one is not a day trader then he can choose mutual funds.