Asked by Zareth Lim

What is the difference between mutual fund and ETF?

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  • Jonathan Chia Guangrong
    Jonathan Chia Guangrong, Fund Manager at JCG Fund
    Level 6. Master
    Answered on 21 Mar 2019

    Just to add on to what the others have shared. Mutual funds usually reside on a platform where there are fees involved on top of the fund's management fees. Dividends, if any are taken off the NAV. And there may also be a sales charge when buying funds, usually 3 or 5%.

    Some etfs can be traded 24/5, so you are not limited to just market hours. Depending on the platform used, there may be platform fees incurred as well for etfs. But this is usually minimal as compared to the ones for mutual funds. There are management fees for etfs as well but this is usually very minimal, less than 1% or even as low as 0.04%.

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  • Isaac Chan
    Isaac Chan, Business at NUS
    Top Contributor

    Top Contributor (Mar)

    Level 7. Grand Master
    Answered on 21 Mar 2019

    Hi Zareth! I did some simple research and maybe can summarise it here for you.

    Timing of Trade: Mutual funds trade at the end of the day, while ETFs trade within the day. Just to be sure, the funds trade at the Net Asset Value of the underlying assets of the funds.

    For mutual funds since you can only trade at the end of the day, you can't do anything if the stocks prices rise or fall throughout the day. Whereas for ETFs, you can make use of intra-day price changes, and trade. However, some funds may have a wide spread between the bid and ask prices, which can make trading them more challenging. Thus, you should look at ETFs that are more heavily traded.

    Stock Orders: Investors who trade investors can mitigate some of the risks of ETFs such as placing limit orders such as fixing a price at which a trade can be exectued or a stop order where the trader can predetermine at which price he wants to buy or sell. Mutual funds don't quite hold such benefits.

    Expense Ratios: ETFs usually have a lower expense ratio than mutual funds. Expense ratios are charged to cover up for the operating expenses for the funds, such as fund manager and analysts fees.

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  • Charmaine Ng
    Charmaine Ng, The Code Breaker at @ Every Chye Peng Stall.
    Level 5. Genius
    Answered on 02 Mar 2019

    Mutual fund: wealth manager with team of analysts; usually comes with higher costs. They pick stocks and successful investment relies heavily on the skill sets of these teams so there's the risk. Comes with annual management fees usually.

    ETF: Exchange traded fund is basket of funds that comes with lower costs. Also usually have 24/7 updates when you use roboadvisors. Takes out more human biases.

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