Is it low to buy funds or ETFs? This is a problem that many investors must face when choosing investment tools. Although both of them are basic investment tools, their fee structures and transaction methods are different. This paper will discuss the low cost of purchasing funds or ETFs, and compare them from the following five aspects.
# # Expense structure
Funds and ETFs have different fee structures. Funds usually have management fees and custody fees, as well as other expenses, such as sales fees and conversion fees. The expenses of ETF are mainly management fees and transaction fees. The management fee of ETF is generally lower than that of fund, because the transaction efficiency of ETF is higher. ETFs usually do not need to pay sales fees and conversion fees, so the total cost is lower than that of funds.
# # Transaction cost
The transaction costs of funds and ETFs are also different. Funds usually trade at net asset value (NAV), while ETFs trade at market price. The net asset value of the fund is published once a day, usually at the end of the trading day. If you want to buy and sell funds in the morning or noon of the trading day, you can only use the net asset value of that day. The market price of ETF can be bought or sold at any time on the trading day, which means you can trade at the current market price. ETFs usually have lower transaction costs than funds because they are easier to trade and do not need to pay subscription or redemption fees.
# # Portfolio
The portfolios of funds and ETFs are also different. Funds are usually active portfolios managed by investment managers, who make investment decisions according to market conditions. ETF is usually a passive portfolio that tracks a specific index or industry, so its investment strategy is relatively simple. This means that the fund's investment portfolio is more flexible, but ETF is more predictable.
# # Liquidity
ETFs are usually more liquid than funds. Because ETF transactions are more efficient and the market is more liquid. The market price of ETF can be traded at any time, which means that investors can buy and sell according to the current market price. In contrast, the trading methods of funds are more complicated and need more time to trade. If you need to buy and sell quickly in a short time, ETF may be more suitable for you.
# # Tax impact
Funds and ETFs have different effects on tax revenue. Funds usually generate certain dividends and capital gains tax, because fund managers will buy and sell in the fund portfolio. ETFs usually do not have these tax effects because they are passive portfolios that track specific indexes or industries. ETFs are usually easier to optimize taxes because they are easier to buy, sell and convert.
On the whole, the cost of buying ETFs is generally lower than that of buying funds, because ETFs are more efficient and do not need to pay sales fees and conversion fees. ETFs are usually more liquid and easier to optimize taxes. The fund's investment portfolio is more flexible and can provide better returns. When choosing investment tools, you should choose according to your investment objectives and risk preferences.