{"id":924431,"date":"2021-06-08T21:31:19","date_gmt":"2021-06-09T01:31:19","guid":{"rendered":"https:\/\/www.finder.com\/ca\/?p=924431"},"modified":"2025-12-31T05:16:04","modified_gmt":"2025-12-31T10:16:04","slug":"etfs-vs-mutual-funds","status":"publish","type":"post","link":"https:\/\/www.finder.com\/ca\/investments\/etfs-vs-mutual-funds","title":{"rendered":"ETFs vs mutual funds: What\u2019s the difference?"},"content":{"rendered":"

If you\u2019re a new investor, choosing individual stocks to invest in can be complicated and time-consuming. But ETFs and mutual funds offer a simple solution.<\/p>

Both are types of investment funds hold a \u201cbasket\u201d of stocks and bonds. They\u2019re professionally managed, widely available, and they make it easy to diversify your investment portfolio.<\/p>

But what are the similarities and differences between ETFs and mutual funds, and which type of fund is right for you? Let\u2019s compare ETFs vs mutual funds to find out.<\/p>

ETFs vs mutual funds: Side-by-side comparison<\/h3>

We\u2019ll break down the similarities and differences between ETFs and mutual funds in detail further down the page. But if you want a quick summary of how they compare, check out the table below.<\/p>
Feature<\/th>ETFs<\/th>Mutual funds<\/th><\/tr><\/thead>
Assets they hold<\/strong><\/td>Stocks, bonds, cash, commodities and other securities<\/td>Stocks, bonds, cash, commodities and other securities<\/td><\/tr>
How they\u2019re traded<\/strong><\/td>Traded on exchanges just like stocks, so you can buy or sell ETF units throughout the trading day<\/td>Traded once a day at the end of each trading day<\/td><\/tr>
Active or passive management<\/strong><\/td>Can be either<\/td>Can be either, but actively managed funds are more common<\/td><\/tr>
Fees<\/strong><\/td>
  • Some brokers offer $0 commission ETF trading, but others charge a brokerage fee<\/li>
  • Index ETFs have low management expense ratios (MERs) of less than 0.25%, while actively managed ETFs commonly have MERs of 0.5% \u2013 1% or higher<\/li><\/ul><\/td>
  • Brokerage fee may apply<\/li>
  • Some funds charge load fees of up to 5%, but no-load funds are also available.<\/li>
  • Index mutual funds have low MERs of less than 0.25%, but actively managed mutual funds have MERs ranging from 0.5% \u2013 3%<\/li><\/ul><\/td><\/tr>
Minimum investment<\/strong><\/td>The price of a single unit of the ETF. Or if you use a broker that supports fractional shares, you can invest with as little as $1<\/td>Commonly $500 \u2013 $5,000, depending on the fund<\/td><\/tr>
Tax efficiency<\/strong><\/td>More tax efficient<\/td>Less tax efficient<\/td><\/tr><\/tbody><\/table>

What is an ETF?<\/h3>

ETF stands for exchange-traded fund. An ETF is an investment fund that pools together money from investors to buy a range of stocks or bonds.<\/p>

ETFs are traded on a stock exchange just like shares in an individual company. But unlike stocks, when you buy a share in an ETF, you gain exposure to all the assets the fund holds.<\/p>

ETFs are often passively managed index funds that aim to replicate the performance of an underlying index. For example, you could invest in a TSX 60 ETF to track the performance of 60 of the largest companies on the Toronto Stock Exchange, or gain exposure to 500 leading US companies with an S&P 500 ETF.<\/p>

However, there are also actively managed ETFs that aim to outperform the market, and ETFs that focus on specific sectors such as tech, growth or dividend stocks.<\/p>

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\nDive deeper: <\/span>How do ETFs work?<\/a>\n<\/div>\n<\/article>

What is a mutual fund?<\/h3>

Like an ETF, a mutual fund is a professionally managed investment fund that gathers together investor money. That money is then invested in a variety of assets, such as stocks and bonds.<\/p>

As an investor, you can buy shares in a mutual fund to gain exposure to the assets it holds. Some mutual funds are actively managed to try to beat the market, but there are also index funds, fixed income funds, and funds that target specific market sectors.<\/p>

But while you can buy ETFs on stock exchanges throughout the trading day, you can only buy mutual funds at the end of the trading day.<\/p>

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\nRelated: <\/span>Mutual fund vs GIC: Which investment is better?<\/a>\n<\/div>\n<\/article>

How are ETFs and mutual funds similar?<\/h3>

ETFs and mutual funds are similar because:<\/p>