Mutual Funds

ETF vs Mutual Funds

The more critical you have to perform is to secure your financial future. There are a plethora of options available in India for investors. Among them, the most popular are ETF and mutual funds. No doubt they are looking the same but there are some differences among them. It could be lucrative for you to choose the better one by studying ETF vs. mutual funds.

Mutual funds: it is a scheme of professional management of investment that collects money from different investors and trades in diversified holdings. These funds invest in a vast array of securities like bonds, stocks, and debt instruments. Each and every scheme is having a NAV i.e. Net Asset Value, derived when the total number of investments divided by the number of investors.

ETF: Exchange ETF or mutual fund is a kind of funds that managed passively. Moreover, all the stocks hold usually in the same weight by these funds because they are held by the underlying index. These funds are not managed actively by the fund manager. These can be freely sold and purchased throughout the trading session as they are traded on the stock exchange actively.

Difference between ETF and mutual fund

While choosing an option for investment among ETF or mutual fund, the crucial one is ETF. Mutual funds and ETFs look so similar but they are quite different from one another. Some ETF and mutual fund difference are the following given below:

Flexibility: It is one of the main differences between ETF and mutual fund. ETFs are more flexible than mutual funds as they can be traded freely in the market or can be purchased or sold according to the convenience of investors. Moreover, like ordinary equity shares price of their market is available in real-time. Whereas, mutual funds units could be purchased or sold by requesting the fund house. The price of a mutual fund’s one unit is indicated by NAV.

Expenses and fees: ETF vs. mutual fund also shown on the basis of the fee. ETF does not require active management, as they replicate merely the index performance. Hence, the fees associated with these investments are comparatively low. However, in mutual funds on behalf of investors, the fund manager could take investment decisions actively.

Commissions: In the case of ETFs, the investors required to pay commissions on both the purchase and sale of units in accordance with prevailing rules. However, in the case of mutual funds, there is no such requirement of paying commissions for purchase and sale. Hence, commissions are another difference for ETF vs. mutual funds India.

Management: In the case of mutual funds, an experienced fund manager could take investment decisions on behalf of investors whereas, in the case of ETFs, the funds track the index of the market. Moreover, there are actively managed ETFs but their expense ratio is higher.

Lock-in period: Mutual funds have a lock-in period of three years. Moreover, this could vary from nine days to three years on the basis of the selected scheme of the mutual fund. Also, there is no possibility to liquidate the investment, during this time period. However, ETFs do not have a minimum time period for holding. The investors could freely sell the investment.

At last, both options for investment are good. Still, there are many factors you need to consider that show ETF vs. mutual funds. These are following

  • Investment horizon
  • Risk appetite
  • Tax-saving strategy
  • Financial goals

https://www.tradebulls.in/  is the best place where you can invest your money safely. They tell you about your investments from the basics. You could choose the best one after careful consideration.