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Difference 1: the investment target is different.
ETF-usually tracks specific indexes (including but not limited to existing indexes in the market). This index can be established by the publisher himself. At present, many ETF products are publicly issued and traded in the North American market. For example, ROBO (Nasdaq), which focuses on the global robot automation industry, and ITA (NYSE), which anchors the national defense and military sector, are both outstanding in their respective fields (other ETF index products with excellent performance will be introduced in future articles).
Mutual fund-you can track the index, or the fund manager can choose his own stock portfolio, with different investment strategies and styles.
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Difference 2: Different liquidity.
ETF-as its name implies, is a listed product, which can be traded on the exchange like a stock. During the trading day, the price fluctuates with the market, so the liquidity premium is low and the liquidity is high. Exchange-traded funds can no longer be traded after the market closes.
Mutual fund-not traded on the exchange, the transaction price is calculated according to the closing price of all the stocks contained in the fund on the same day. * * * The same fund can only be traded once every trading day, and its liquidity is relatively low.
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Difference 3: The flexibility of position adjustment is different.
Exchange traded funds-most exchange traded funds are passive funds that track an index or market. Therefore, the risk of ETF heterogeneity is low. Every quarter, the fund manager will adjust and announce the position, and generally will not take the initiative to adjust the position within one quarter after adjustment.
Mutual funds-* * * Mutual funds are usually actively managed. Fund managers and investment teams adjust and trade positions every day. Therefore, the investment position is more flexible with the fund.
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Difference 4: Investors have different independent control abilities.
ETF-allows investors to buy and sell in time according to their portfolio and market changes, so as to adjust their investment strategies. Accordingly, investors should also be responsible for the profit and loss of their investment decisions.
Mutual funds-* * * The flexibility of the same fund position also determines that investors cannot independently decide their own investment targets. In terms of investment objectives, we can only rely on the strength of fund managers and their investment teams, and investors' bargaining power is low.
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Variance 5: Commission and tax
Whether investors buy ETFs or mutual funds, they need to pay commissions to fund managers.
In terms of taxation, ETF tracks an index and has a low turnover rate, which can meet the requirements of 6 1- 120 days before and after the dividend date, so it only needs to pay a low long-term capital gains tax and does not need to pay personal income tax that does not meet the survival requirements. ETF has certain advantages in taxation and low commission.
On the contrary, * * * the same fund generally has a multi-layer network in the process of sales and issuance, and there are many hidden fees. This has also led to potential conflicts of interest between fund managers and investors. Buying and selling mutual funds may also generate capital gains tax.
Through the above comparison, I hope you have a basic understanding of the investment model and characteristics of ETF and mutual fund. However, both ETF and mutual fund, as long-term investment options, have far better returns than other passive financial investments, including some types with high annual dividends.