Q. Why ETF's are better than mutual funds?
A. Here are 3 major advantages of ETFs over mutual funds:
1. Trading Flexibility
You can buy and sell ETFs just like stocks, you specify the price, you can trade any number of times a day. However, for mutual funds, you can only buy and sell once a day, and you don't even know what will be your buying or selling price until the market closes.
2. Lower Costs
Because ETF's structure is different from mutual funds, for example, there is no customer service, no requirement to send out statements to holders on a regular basis, etc. ETFs enjoy lower costs.
3. Tax Advantages
If you are a mutual fund holder, even you didn't do any selling last year, you can still receive tax form from the mutual fund at the tax season that shows capital gains, that's because mutual funds pass through capital gains to all fund holders. As a contrast, if you hold an ETF and didn't sell it, you will not incur capital gain (note: there could still be dividend related taxes).
A. Here are 3 major advantages of ETFs over mutual funds:
1. Trading Flexibility
You can buy and sell ETFs just like stocks, you specify the price, you can trade any number of times a day. However, for mutual funds, you can only buy and sell once a day, and you don't even know what will be your buying or selling price until the market closes.
2. Lower Costs
Because ETF's structure is different from mutual funds, for example, there is no customer service, no requirement to send out statements to holders on a regular basis, etc. ETFs enjoy lower costs.
3. Tax Advantages
If you are a mutual fund holder, even you didn't do any selling last year, you can still receive tax form from the mutual fund at the tax season that shows capital gains, that's because mutual funds pass through capital gains to all fund holders. As a contrast, if you hold an ETF and didn't sell it, you will not incur capital gain (note: there could still be dividend related taxes).
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