What are the differences between ETFs and mutual funds?

What are the differences between ETFs and mutual funds?

ETFs (Exchange-Traded Funds) are traded on stock exchanges like individual stocks, while mutual funds are bought directly from the fund company. ETFs typically have lower fees and can be traded throughout the day, whereas mutual funds are priced at the end of the trading day.

Which one is better for long-term investing?

It depends on your investment strategy. ETFs may be better for those who want flexibility and lower costs, while mutual funds might be preferable for investors looking for professional management and a more hands-off approach.

Are there any tax advantages to using ETFs?

Yes, ETFs generally have tax advantages due to their structure, which allows investors to defer capital gains taxes until they sell their shares. This can be beneficial for long-term investors.

What are the risks associated with each?

Both have risks, but ETFs can be more volatile since they trade like stocks. Mutual funds may have management risk and can be less liquid, depending on the fund's structure.