What advantages do exchange-traded funds have over mutual funds?

Investing, ETFs, Mutual Funds
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ETFs are investments traded on stock exchanges that hold assets such as stocks, bonds, and commodities. Traditionally, they been index funds and have similar valuation features to mutual funds and Unit Investment Trusts (UITs). Here are advantages that ETFs have over mutual funds:

  • Expenses - The typical expense ratio is from 0.1% to 1% versus 1% to 3% for a mutual fund.
  • Tax efficiency - You can sell at your convenience and there are no unexpected capital gains as with a mutual fund.
  • Flexibility - Since ETFs are traded on an exchange, you can sell them during trading hours and not at the end of the day as with a mutual fund.
  • Control - ETFs do not have fund managers and can be sold at your discretion, the opposite of a mutual fund.
  • Efficiency - Without a fund manager that can possibly make rash decisions, there are fewer risks than a mutual fund.

Before making investment decisions, make sure to consider all of the pros and cons.

If you have any further questions, I'd be happy to help. 

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