How are ETFs different from mutual funds?

ETFs (Exchange Traded Funds) and mutual funds are similar in that they both pool together money from investors to invest in a diversified portfolio of assets such as stocks, bonds, or other securities. However, there are some key differences between the two:

1. Trading: ETFs trade on exchanges like stocks, which means that their prices can fluctuate throughout the day, whereas mutual funds are priced at the end of the trading day. This makes it easier for investors to buy and sell ETFs quickly and at any time during the trading day.

2. Fees: ETFs typically have lower fees than mutual funds because they do not require as much management and administrative work.

3. Minimum investment: ETFs can be purchased for the price of a single share, while mutual funds typically have higher minimum investment requirements.

4. Tax efficiency: ETFs are generally more taxefficient than mutual funds because they are structured in a way that minimizes the amount of taxes that investors pay on capital gains distributions.

Overall, both ETFs and mutual funds have their advantages and disadvantages, and investors should carefully consider their investment goals and risk tolerance before deciding which one to invest in.