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Henry Williams
Henry Williams

Buy Etf Or Mutual Fund !LINK!

All funds carry some level of risk. With mutual funds, you may lose some or all of the money you invest because the securities held by a fund can go down in value. Dividends or interest payments may also change as market conditions change.

buy etf or mutual fund

As with any business, running a mutual fund involves costs. Funds pass along these costs to investors by charging fees and expenses. Fees and expenses vary from fund to fund. A fund with high costs must perform better than a low-cost fund to generate the same returns for you.

Even small differences in fees can mean large differences in returns over time. For example, if you invested $10,000 in a fund with a 10% annual return, and annual operating expenses of 1.5%, after 20 years you would have roughly $49,725. If you invested in a fund with the same performance and expenses of 0.5%, after 20 years you would end up with $60,858.

It takes only minutes to use a mutual fund cost calculator to compute how the costs of different mutual funds add up over time and eat into your returns. See Mutual Fees and Expenses to learn about some of the most common mutual fund fees and expenses.

Following the previous article Will ETFs Continue Their Surge in 2022?, which discussed the tremendous growth in the exchange traded funds (ETF) space -- with some coming at the expense of mutual funds -- many mutual funds are now converting into ETFs, a trend the industry has seen since last year.

To name a couple of examples, in March 2021 Guinness Atkinson Funds converted two dividend focused mutual funds into ETFs and in June 2021 Dimensional Fund Advisors converted four funds worth $30 billion.1 More recently in January 2022, JPMorgan converted four funds with combined assets of $8.7 Billion.2 There have been other fund groups performing conversions to ETFs as well and the expectation is that we will see further conversions in 2022 and beyond.

As a quick refresher, both mutual funds and ETFs are registered as open-ended management companies under the Investment Company Act of 1940 (1940 Act) and are subject to the rules and regulations under the 1940 Act. Two of the more significant features that differentiate ETFs from mutual funds are how shares are transacted and the tax efficiencies of ETF vehicles:

In most cases the preferred reorganization scenario is to form a new affiliated ETF entity and under Rule 17a-8, merge the existing mutual fund with the newly created ETF. The mutual fund historical performance could still be utilized for the ETF, since the merger would be considered an asset transfer.

Now that numerous mutual funds have blazed the conversion trail for others to follow and the SEC has not shown any reluctance to prevent any of the previous conversions to ETFs it stands to reason that more conversions will follow in the near future.

Top five lists are not a recommendation by E*TRADE Securities or its affiliates to buy, sell, or hold any security, financial product or instrument, nor is it an endorsement of any specific security, company, fund family, product, or service.

Data quoted represents past performance. Past performance is not an indication of future results and investment returns and share prices will fluctuate on a daily basis. Your investment may be worth more or less than your original cost when you redeem your shares. Current performance may be lower or higher than the performance data quoted. For most recent quarter end performance and current performance metrics, please click on the fund name.

A mutual fund's prospectus contains its investment objectives, risks, charges, expenses, and other important information and should be read and considered carefully before investing. For a current prospectus, visit

E*TRADE charges $0 commission for online US-listed stock, ETF, mutual fund, and options trades. Exclusions may apply and E*TRADE reserves the right to charge variable commission rates. The standard options contract fee is $0.65 per contract (or $0.50 per contract for customers who execute at least 30 stock, ETF, and options trades per quarter). The retail online $0 commission does not apply to Over-the-Counter (OTC) securities transactions, foreign stock transactions, large block transactions requiring special handling, futues, or fixed income investments. Service charges apply for trades placed through a broker ($25). Stock plan account transactions are subject to a separate commission schedule. All fees and expenses as described in a fund's prospectus still apply. Additional regulatory and exchange fees may apply. For more information about pricing, visit

All-Star lists are not a recommendation by E*TRADE Securities or its affiliates to buy, sell or hold any security, financial product or instrument, nor is it an endorsement of any specific security, company, fund family, product, or service. All-Star Mutual Funds typically have at least a three year track record and compare favorably against their peers based on historical return, risk, expenses, manager tenure, performance and style consistency, asset size and growth and must be 1) structured through sound investment philosophy and process, 2) implemented with acceptable level of investment risk management strategy and 3) supported by a well-balanced investment firm. All-Star Mutual Funds can include mutual funds managed by our affiliates, Morgan Stanley Investment Management, Eaton Vance Management and Calvert Research and Management. The Income Producing Funds are certain mutual funds included on the All-Star List which distribute income at least quarterly and have a consistent track record of paying regular distributions higher than the relevant benchmarks. For more information on the All-Star List, please see the list criteria on

You can use Automatic Investing to add to existing mutual fund positions. If you don't already own shares in the fund you wish to buy, you must schedule an initial purchase during the setup of your Automatic Investing plan. The initial purchase amount must meet or exceed the required minimum initial investment set by the fund company.

All index funds and the vast majority of ETFs use the same strategy: Passive index investing. This approach seeks to passively replicate the performance of an underlying index, providing easy diversification and sustainable long-term returns.

Index funds and ETFs provide a simple way to diversify your portfolio. Both offer exposure to hundreds or even thousands of securities, depending on the index they emulate. This can greatly decrease the likelihood your portfolio will be adversely impacted by big market swings.

While they may seem insignificant, expense ratios can really eat into your total returns over time. Assuming you invested $6,000 a year for 30 years and saw an average annual return of 6%, investing in the average index mutual fund would save you almost $60,000 over the cost of the average actively managed mutual fund.

Then there are load fees, another form of sales commission. Front-end load fees may be charged for buying funds while back-end load fees may be charged for selling funds. Load fees can be a percentage of your total purchase or a flat fee. ETFs lack load fees entirely.

So a given ETF may charge a higher annual expense ratio than an index fund you have your eye on, but you need to take into account the potential commissions and sales load fees charged by a comparable index fund.

Until recently, most ETFs were not available as fractional shares (depending on your brokerage, they still might not be). Index funds, on the other hand, have always been available in fractional amounts.

When you buy into an index fund, managers convert the dollar value of your investment into the correct number of shares based on the NAV the day of your purchase, regardless of whether you end up with a fractional share or not.

Fractional shares have the potential to help you get your money in the market sooner by letting you buy parts of full shares of funds instead of purchasing full, pricier shares. This also lets you better take advantage of dollar-cost averaging, which may help you pay less per share overall over time.

ETFs are generally more tax efficient than mutual funds. While you will pay capital gains taxes on any gains you realize when you sell shares of an index fund or an ETF, you do not pay taxes when the holdings in the ETF portfolio are adjusted by managers.

Index funds, on the other hand, must buy and sell assets to adjust their portfolio to track the underlying index. The cost of any capital gains taxes from these sales are taken out of the fund portfolio NAV, which impacts the value of your index fund shares. That said, index fund holdings rarely change, so this may not be a huge issue for you.

iShares unlocks opportunity across markets to meet the evolving needs of investors. With more than twenty years of experience and a global line-up of 1,250+ ETFs, iShares continues to drive progress for the financial industry. iShares funds are powered by the expert portfolio and risk management of BlackRock.

Mutual funds and ETFs can be used as part of a buy-and-hold investment strategy (investing over a longer term), while ETFs can also be used for almost any investment strategy, including day trading. ETFs trade in real time (like stocks do), while mutual funds can only be bought and sold at the end of the day and switching investments takes two days in addition to the day a fund is bought or sold.

Depending on the type of fund you buy, you may get distributions of dividends, interest, capital gains or other income the fund earns on its investments. With a mutual fund, you may choose to receive distributions in cash or have them reinvested in the fund for you. Unless you request the distributions to be paid in cash, the mutual fund will often reinvest the distributions for you.

Like stocks, ETFs trade all day, meaning the price of an ETF can change minute by minute. Mutual funds are instead priced once daily, at the end of a trading day. This gives you no option other than to buy at the closing price, which is known as the net asset value. 041b061a72


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