What is a mutual fund?Ī mutual fund pools money from investors to build a portfolio of assets. Here is how these two popular investment funds compare when it comes to structure, trading and costs. “You can really build a nicely, well-diversified portfolio using ETFs or mutual funds,” says Misty Lynch, chief executive of Sound View Financial Advisors near Boston. It’s a big reason nearly half of all U.S.
And broadly speaking, you get more bang for your buck. While there are also some active ETFs, most ETFs are so-called index funds that take the newer approach.Įither way, buying funds helps you avoid betting too much money on a single company. Mutual-fund managers may take the traditional “active” approach of trying to pick winning stocks that will outperform the rest of the stock market, or they may take a newer “index” approach, aiming merely to match market returns.
Both mutual funds and ETFs are overseen by a portfolio manager.
