Mutual Fund vs. ETF vs. Index Funds: Does it Matter?

What’s the difference (and does it even matter) between mutual funds vs. ETFs vs. index funds?
All of those options allow you to invest easily and spread your assets among many different investments. But there are some differences that make each option unique.
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People often use these terms interchangeably, which can lead to confusion. Did that person really mean to say mutual fund vs. ETF, for example? This confusion might make you wonder which strategy is best for your life savings.
Mutual funds and ETFs are pooled investments that enable you to diversify with ease. In some cases, it probably doesn’t matter which one you use.
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But there are differences, and sometimes those differences are important. Understanding how each option works can help you choose the best one.
For example, mutual funds are easy to manage, and they’re especially well-suited for automating your finances. That’s because you can schedule purchases (or sales) along with monthly bank account transfers.
ETFs trade throughout the day like stocks. That might offer some benefit, but it can also introduce complexity and the temptation to trade actively. ETFs can also enjoy tax efficiencies, which might matter if you have significant holdings in taxable accounts.
Index funds are passive investment vehicles. In general, they tend to have low costs, tax efficiency, and performance that more or less follows a market segment.
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CHAPTERS
00:42 Similarities of Mutual Funds and ETFs
02:46 Differences Between ETFs and Mutual Funds
06:53 Minimums to Purchase
07:49 Costs of ETFs vs. Mutual Funds
10:10 Market Factors: Bid/Ask Spread and NAV
12:31 Taxes: ETFs Can Be More Tax-Efficient
14:03 Indexing (Passive) Investing
15:31 Advantages of Index Investing
19:33 Which Is Best?
RESOURCES:
Read the article: www.approachfp.com/mutual-fun...
Are Index Funds Safe? • Wait... I Can LOSE Mon...
SEC Guide - Mutual Funds and ETFs: www.sec.gov/investor/pubs/sec...
Justin Pritchard, CFP® is a fee-only fiduciary advisor who can work with clients in Colorado and most other states.
IMPORTANT:
It's impossible to cover everything you need to know in a video like this. The only thing that's certain is that you need more information than this. Always consult with a CPA before making decisions or filing a tax return. This is general information and entertainment, and is not created with any knowledge of your circumstances. As a result, you need to speak with your own tax, legal, and financial professional who is familiar with your details. This video is not a substitute for individualized, personal advice. Please verify with your plan administrator when employer plans are involved. This information may have errors or omissions, may be outdated, or may not be applicable to your situation. Investments are not bank guaranteed and may lose money. Opinions expressed are as of the date of the recording and are subject to change. “Likes” should not be considered a positive reflection of the investment advisory services offered by Approach Financial, Inc. The Comments section contains opinions that are not the opinions of Approach Financial, Inc., and you should view all comments with skepticism. Approach Financial, Inc. is registered as an investment adviser in the state of Colorado and is licensed to do business in any state where registered or otherwise exempt from registration.
And furthermore... This is a high-level overview that omits many details that might be important. There are exceptions, curveballs, and complications for everything you see here-so you need to triple-check before trading. Some risks and disadvantages are ignored here, but you should not ignore them, so you need to do more research. Some opportunities/advantages are ignored here, but you should not ignore them. You can and will lose money investing, which may prevent you from reaching financial goals or having the resources you need. You may face tax surprises and other unwanted events regardless of what type of investment you use. To manage those events, do not rely solely on this oversimplified information. Instead, do significantly more research or work with a professional who is familiar with your individual circumstances. This is not individualized advice, as it is presented with zero knowledge of your specific circumstances. You cannot invest directly in an index, and index funds (like other funds) have costs that reduce net returns. Read a prospectus carefully before investing. This stuff is too important to take shortcuts.

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[@casmithc2]

Justin, this is GREAT INFORMATION!!

[@TheTekstream]

Ty for the informative video. much appreciated!

[@user-py7wp6nw9h]

Please take in consideration that if you move , say, a ROTH or 401k from Vanguard to Fidelity (while holding Vanguard Mutual Funds), Fidelity DOES NOT charge a fee. They ONLY charge a fee if you have an account with them and BUY a vanguard fund through them.....therefore not in a roll over