Mutual Fund vs Exchange-Traded Fund (ETF)
A pooled fund priced once daily at net asset value. A pooled fund that trades intraday on an exchange like a stock.
What is the difference between Mutual Fund and Exchange-Traded Fund (ETF)?
Mutual fund = one price a day, trades with the fund, distributes capital gains. ETF = trades all day on an exchange, generally more tax-efficient.
| Mutual Fund | Exchange-Traded Fund (ETF) | |
|---|---|---|
| In one line | A pooled fund priced once daily at net asset value. | A pooled fund that trades intraday on an exchange like a stock. |
| Example | An order entered at 11 a.m. fills at the 4 p.m. NAV, not at the price when it was placed. | You can buy an ETF at 10:15 a.m. with a limit order; a mutual fund makes you wait for the close. |
| Unit | Securities & Instruments | Securities & Instruments |
| Series 65 | Section 2: Investment Vehicles | Section 2: Investment Vehicles |
What is Mutual Fund?
A registered investment company that pools investor money into a managed portfolio. Shares are bought and sold directly with the fund at the day's closing NAV - no intraday trading. Funds must distribute realized capital gains to shareholders annually, which can create a tax bill even in a down year.
What is Exchange-Traded Fund (ETF)?
A fund whose shares trade on an exchange throughout the day at market prices that track, but can deviate from, NAV. The in-kind creation and redemption mechanism keeps price near NAV and makes ETFs unusually tax-efficient relative to mutual funds.