ETFs must be purchased through a broker, and a brokerage commission must be paid when you buy shares of an ETF. An investor trading in and out of an ETF will incur trading costs, which can make ETFs less suited to systematic investing programs such as dollar cost...
Traditional mutual funds are bought and sold based on their net asset value at the close of business each trading day, while ETFs can be traded throughout the day from market open to market close. ETFs allow investors to diversify their holdings within a group of...
From a technical standpoint, an ETF works a bit differently than a mutual fund does, even a passively managed mutual fund that tracks the same index as the ETF. Mutual funds essentially buy and sell securities for cash on the open market; the process for an ETF is...
The Investment Act of 1940 set up the rules that mutual funds must adhere to. The act says, among other things, that mutual funds cannot actively trade throughout the day. However, when Congress passed these laws, it granted exemption powers to the Securities and...
Like a mutual fund, an exchange-traded fund pools the money of many investors and purchases a group of securities. Like index mutual funds, most ETFs are passively managed. Instead of having a portfolio manager who uses his or her judgment to select specific stocks,...
