ECONOMICS
FINANCIAL MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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ETF is active while Mutual fund is a passive instrument
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Mutual fund can be traded like a stock while ETF can’t be traded
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ETF is traded real time in exchanges while mutual fund is not
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None of the above
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Detailed explanation-1: -The main difference between ETF and Mutual Fund is that while ETFs can be actively bought and sold on the exchanges, just like any other shares, one can only purchase a unit of a Mutual Fund from a fund house even though these can be listed on the exchanges.
Detailed explanation-2: -With a mutual fund, you buy and sell based on dollars, not market price or shares. And you can specify any dollar amount you want-down to the penny or as a nice round figure, like $3, 000. With an ETF, you buy and sell based on market price-and you can only trade full shares.
Detailed explanation-3: -ETFs are very similar to mutual funds, but the biggest differences are that: Investors can trade ETFs in real-time throughout the trading day, unlike mutual funds that only trade once a day. ETFs have lower investment minimums.
Detailed explanation-4: -ETFs, like mutual funds, are a portfolio of securities. While the majority of them follow an index, they invest in stocks, bonds, and other securities. FOF is a collection of mutual funds. They invest in other mutual funds based on risk tolerance and investment objectives.
Detailed explanation-5: -Like stocks, ETFs can be traded on exchanges and have unique ticker symbols that let you track their price activity. Unlike stocks, which represent just one company, ETFs represent a basket of stocks. Since ETFs include multiple assets, they may provide better diversification than a single stock.