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    ETF vs Mutual Fund

    ETF vs Mutual Funds

    Other than whats listed here are there any other differences between Mutual Funds and ETFs? Its free for me to buy vanguard ETFs through my brokerage but I'd have to pay for mutual funds. If there aren't any real differences I'd like to stick to the ETF versions of the mutual funds vs opening an account at Vanguard for the free trades.

    #2
    I'd go ahead and invest in the ETFs. There's not enough differences between the ETF and mutual fund to have one be better than the other (IMO).

    Also, in a taxable account, ETFs usually only generate dividends whereas the mutual fund might generate short term and/or long term capital gains during the year. So ETFs might be more tax efficient.
    Last edited by Jluke; 04-17-2017, 10:48 AM.

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      #3
      There are a few reasons I prefer Mutual Funds over ETF's, here is a good article on it:

      http://www.etf.com/sections/index-in...etter-its-etfs

      If I was at a brokerage where Vanguard ETF's were free and Vanguard Mutual funds were not I would definitely go with the ETF's. As Jluke said there isn't that much of a difference. One thing to note though Vanguard ETF's/Mutual Funds are different share classes of the same funds so they have the same tax efficiency, this as I understand it is unique and Mutual Funds at other companies can have tax inefficiencies compared to their ETF brethren.

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        #4
        ETFs, or Exchange Traded Funds, are also mutual funds, but they are listed on the stock exchange and can be bought and sold like a share.

        Normal Mutual Funds declare NAV at the end of the day. ETF prices fluctuate as they are traded.

        Due to the above, you cannot buy and sell units of a mutual fund on the same day. But you can buy and sell units of an ETF on the same day (although that is not recommended at all).

        You only need a bank account to buy normal mutual fund. You need a demat and brokerage account to buy units of ETFs.

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          #5
          you can buy eft at a discount or premium to actual value. depending on your brokerage, efts maybe cheaper to buy since they're traded as a stock share and not a mutual fund.

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            #6
            Originally posted by Jluke View Post
            I'd go ahead and invest in the ETFs. There are not enough differences between the ETF and mutual fund to have one be better than the other (IMO).

            Also, in a taxable account, ETFs usually only generate dividends whereas the mutual fund might generate short-term and/or long-term capital gains during the year. So ETFs might be more tax efficient.
            this also is dependent on how large your portfolio is - a cost effective, self-balancing mutual fund may suffice for a smaller portfolio, e.g. 1% of 10k is 100$ vs. 0.3%, or 30$.. a 70$ saving per annum vs. the inconvenience of not balancing annually and therefore forgetting / not contributing for the long term.

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