Index Mutual Funds vs. Exchanged Traded Funds (ETFs)

Mutual funds are priced once per day after the markets have closed. You can purchase and redeem shares through the funds directly.

ETFs are indexed vehicles that trade like stocks, are traded through a brokerage account throughout the day, and their prices fluctuate all day. Expense ratios are usually slightly lower. You will incur commissions for each transaction. If you invest regularly, this can be expensive.

In general, when choosing between the two, your preference for trading flexibility should take priority because expense ratios are marginally different.

ETFs are tax efficient compared to mutual funds. However, comparison for ETFs should be with tax-managed funds, which seek to maximize after tax returns.

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