While mutual funds and ETFs are different, both can offer exposure to a diversified basket of securities, and can be good vehicles to help meet investor objectives. Here are some points to consider when weighing vehicle options:
- Trading
Is it important to be able to execute fund trades at prevailing prices throughout the trading day? Consider ETFs. - Transaction costs
Would you prefer trading a fund at NAV without paying a load, and avoiding the potential of paying a premium at purchase (discount at sale)? Consider ETFs or no-load mutual funds. - Margin
Do you like the flexibility of trading on margin? Consider ETFs.4 - Automatic saving
Does your investment strategy include dollar-cost averaging? Consider the automated savings features of mutual funds in brokerage accounts. - Transparency
Do you want to know a fund’s holdings each day? Consider ETFs that offer holdings transparency. - Cost
Make sure to consider all costs and expenses related to any investment vehicle. - Diversification
Do the benefits of both ETFs and mutual funds have the potential to help meet investment goals? Consider building a portfolio incorporating both types of vehicles, including other types of investments, to gain exposure to different asset classes.
In our next blogpost, we will further discuss how to make the ETF vs Mutual Fund choice based on what kind of investor you are.