Mutual Fund vs. ETF: What's the Difference?
Mutual funds and ETFs (exchange-traded funds) both let you own a diversified basket of investments in one purchase. The main difference is how they trade: a mutual fund is priced once a day and bought from the fund company, while an ETF trades on an exchange all day like a stock.
See the difference, explained visually.
Watch a 2-minute animated lesson comparing mutual fund and etf.
At a glance
| Mutual Fund | ETF | |
|---|---|---|
| How you buy | From the fund company | On a stock exchange |
| Pricing | Once per day, after close | Continuously, all trading day |
| Minimum | Often a set minimum | The price of one share |
| Fees | Sometimes higher (esp. active) | Often low (esp. index ETFs) |
| Diversification | Yes, in one buy | Yes, in one buy |
Which should you use?
Mutual Fund
Mutual funds suit hands-off, automatic investing (like fixed monthly contributions) and active management.
ETF
ETFs suit those who want intraday trading flexibility, typically low fees, and a low entry cost.
Frequently asked questions
- What's the main difference between a mutual fund and an ETF?
- How they trade: mutual funds price once daily and are bought from the fund company; ETFs trade all day on an exchange like a stock. Both give diversified exposure.
- Are ETFs cheaper than mutual funds?
- Often, especially index ETFs versus actively managed mutual funds — but it varies by fund. Always check the expense ratio.
- Which is better for beginners?
- Both can work; ETFs offer a low entry cost and flexibility, while mutual funds suit automatic recurring investing. This is general information, not investment advice.