ETF vs Mutual Fund: Key Differences for Investors

2. Expense

During market hours, an ETF has a live price. It can be traded around its NAV. It can also trade above or below it.

The NAV associated with a mutual fund order is declared after the market closes.

3. Account Requirements

ETF investing usually involves opening demat and trading accounts. Mutual funds can be held without a demat account. Investors can access through a fund house website, app, registrar or distributor.

4. Style of Fund

A large number of ETFs are passive. They are looking to copy an index or asset. They do not depend on active security calls.

Mutual funds can either be active or passive. In an active scheme, the fund manager picks assets. The choices have to be in the stated mandate. An indexed mutual fund tracks an index.

5. Cost

The costs of an ETF may include the expense ratio and broking. Exchange fees, taxes and the bid-ask spread may also apply. ETFs with low trading volumes can have large spreads.

The cost of a mutual fund includes the expense ratio. Some schemes may charge exit load. It may apply when units are sold within a specified period. Straight and recurring plans have different cost structures.

6. The Investment Process