{"id":3742,"date":"2021-08-05T14:11:55","date_gmt":"2021-08-05T08:41:55","guid":{"rendered":"https:\/\/www.tickertape.in\/blog\/?p=3742"},"modified":"2022-05-24T12:23:33","modified_gmt":"2022-05-24T06:53:33","slug":"etfs-vs-mutual-funds","status":"publish","type":"post","link":"https:\/\/www.tickertape.in\/blog\/etfs-vs-mutual-funds\/","title":{"rendered":"ETF vs Mutual Funds: What Should You Invest In?"},"content":{"rendered":"\n<p>When it comes to investing, there is a multitude of opportunities at your disposal. Out of the many options available, <a href=\"https:\/\/www.tickertape.in\/blog\/mutual-funds\/\">mutual funds<\/a> and ETFs are the common ones. However, you need to understand the nature of these funds before investing in them.<\/p>\n\n\n\n<p>In order to make things simpler, we discuss the fundamental aspects to consider before choosing a suitable fund to <a href=\"https:\/\/www.tickertape.in\/blog\/why-should-you-prioritise-investing\/\">invest<\/a> in.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_66_1 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tickertape.in\/blog\/etfs-vs-mutual-funds\/#Fundamentals-of-exchange-traded-funds\" title=\"Fundamentals of exchange traded funds\">Fundamentals of exchange traded funds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tickertape.in\/blog\/etfs-vs-mutual-funds\/#Fundamentals-of-mutual-funds\" title=\"Fundamentals of mutual funds\">Fundamentals of mutual funds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tickertape.in\/blog\/etfs-vs-mutual-funds\/#Differences-between-ETFs-and-mutual-funds\" title=\"Differences between ETFs and mutual funds\">Differences between ETFs and mutual funds<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\" id=\"fundamentals\"><span class=\"ez-toc-section\" id=\"Fundamentals-of-exchange-traded-funds\"><\/span><strong>Fundamentals of exchange traded funds<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Also known as <a href=\"https:\/\/www.tickertape.in\/blog\/exchange-traded-funds\/\">ETF<\/a>, exchange traded funds are essentially a type of security that replicate a composition of a market <a href=\"https:\/\/www.tickertape.in\/blog\/stock-market-index\/\">index<\/a>. ETFs were first launched in 1993 in the USA and have seen a substantial increase in terms of investment and popularity. The very first ETF launched in India was BeES (<a href=\"https:\/\/www.tickertape.in\/indices\/nifty-index-.NSEI?utm_source=blog&amp;utm_medium=article\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">Nifty<\/a>-Benchmark Exchange-Traded scheme).<\/p>\n\n\n\n<p>ETF is a type of fund that holds multiple underlying assets, i.e. different stocks, bonds and commodities depending on the index in consideration. An ETF is quite similar to mutual funds but it&#8217;s not the same. Unlike the value of a unit of a mutual fund, which is calculated based on the net asset value at the end of each trading day, the price of an exchange traded fund fluctuates during the trading hours based on the demand and supply. By owning an ETF, you get the <a href=\"https:\/\/www.tickertape.in\/blog\/mitigating-portfolio-risk-through-diversification\/\">diversification<\/a> of an <a href=\"https:\/\/www.tickertape.in\/blog\/index-funds-2\/\">index fund<\/a> along with the liquidity of a stock.<\/p>\n\n\n\n<p>In order to invest in an ETF, all you need is an active trading and Demat account. Since ETFs are traded during market hours, you can purchase a unit of any ETF from the secondary market using your <a href=\"https:\/\/www.tickertape.in\/blog\/what-is-a-trading-account\/\">trading account<\/a>. The units purchased will then be delivered to your Demat account. ETFs can be actively or passively managed. <\/p>\n\n\n\n<p>In the case of an actively managed ETF, a dedicated <a href=\"https:\/\/www.tickertape.in\/blog\/portfolio-manager\/\">portfolio manager<\/a> analyses the market conditions and then invests in securities with high growth potential. Whereas, a passively managed ETF simply mimics the trends of a particular market index and only invests in its constituents. Before investing in an ETF, make sure to understand the <a href=\"https:\/\/blog.tickertape.in\/etf-checklist\/?utm_source=blog&amp;utm_medium=article\" rel=\"nofollow noopener\" target=\"_blank\">important checkpoints<\/a>.<\/p>\n\n\n<span class='bctt-click-to-tweet'><span class='bctt-ctt-text'><a href=\"https:\/\/twitter.com\/intent\/tweet?url=https%3A%2F%2Fwww.tickertape.in%2Fblog%2Fetfs-vs-mutual-funds%2F&#038;text=The%20very%20first%20ETF%20launched%20in%20India%20was%20Nifty%20BeES%2C%20which%20is%20the%20Nifty%20%20Benchmark%20Exchange-Traded%20Scheme.&#038;via=TickertapeIN&#038;related=TickertapeIN\" target=\"_blank\" rel=\"noopener noreferrer\">The very first ETF launched in India was Nifty BeES, which is the Nifty  Benchmark Exchange-Traded Scheme. <\/a><\/span><a href=\"https:\/\/twitter.com\/intent\/tweet?url=https%3A%2F%2Fwww.tickertape.in%2Fblog%2Fetfs-vs-mutual-funds%2F&#038;text=The%20very%20first%20ETF%20launched%20in%20India%20was%20Nifty%20BeES%2C%20which%20is%20the%20Nifty%20%20Benchmark%20Exchange-Traded%20Scheme.&#038;via=TickertapeIN&#038;related=TickertapeIN\" target=\"_blank\" class=\"bctt-ctt-btn\" rel=\"noopener noreferrer\">Click To Tweet<\/a><\/span>\n\n\n<h2 class=\"wp-block-heading\" id=\"mutual\"><span class=\"ez-toc-section\" id=\"Fundamentals-of-mutual-funds\"><\/span><strong>Fundamentals of mutual funds<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A mutual fund is a type of investment that pools the money of several investors and invests it in different asset classes such as stocks, bonds, money market instruments, and debt. Mutual funds are a popular form of investment for retail investors in India. Ever since mutual funds were brought into the Indian market by the UTI Act of Parliament in 1963, the asset class has seen remarkable growth.<\/p>\n\n\n\n<p>There are many similar characteristics between mutual funds and ETFs. Mutual funds trade on the basis of their Net Asset Value (NAV), which changes every day and the units can be bought and sold only based on their price at the end of market hours. Unlike the ETF, mutual funds are closely monitored and an actively managed asset class. Based on the underlying asset of a scheme, <a href=\"https:\/\/blog.tickertape.in\/types-of-mutual-funds-a-quick-overview\/?utm_source=blog&amp;utm_medium=article\" rel=\"nofollow noopener\" target=\"_blank\">mutual funds are available in various types<\/a>.<\/p>\n\n\n\n<p>If you are looking to invest in an index fund, having a Demat account is a prerequisite. For other funds, simply having a trading account will suffice. Here\u2019s a detailed article on <a href=\"https:\/\/blog.tickertape.in\/how-to-invest-in-mutual-funds\/?utm_source=blog&amp;utm_medium=article\" rel=\"nofollow noopener\" target=\"_blank\">how to invest in mutual funds<\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"differences\"><span class=\"ez-toc-section\" id=\"Differences-between-ETFs-and-mutual-funds\"><\/span><strong>Differences between ETFs and mutual funds<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-image alignwide size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"476\" height=\"1024\" src=\"https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2021\/08\/ETF-vs-MF-01-476x1024.png\" alt=\"\" class=\"wp-image-3744\" srcset=\"https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2021\/08\/ETF-vs-MF-01-476x1024.png 476w, https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2021\/08\/ETF-vs-MF-01-139x300.png 139w, https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2021\/08\/ETF-vs-MF-01-768x1653.png 768w, https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2021\/08\/ETF-vs-MF-01-714x1536.png 714w, https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2021\/08\/ETF-vs-MF-01-951x2048.png 951w\" sizes=\"(max-width: 476px) 100vw, 476px\" \/><\/figure>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Differences<\/strong><\/td><td><strong>ETF<\/strong><\/td><td><strong>Mutual funds<\/strong><\/td><\/tr><tr><td>Can it be traded on the stock exchange?&nbsp;<\/td><td>Yes, ETFs can be traded via the stock exchange<\/td><td>No, mutual funds cannot be traded on the stock exchange<\/td><\/tr><tr><td><br>Real-time price&nbsp;<\/td><td>ETFs trade in real-time during market hours<\/td><td>The value of a mutual fund is dependent on the NAV and can only be gauged once the market ends for the day<\/td><\/tr><tr><td>Systematic investment<br><br><\/td><td>There are no monthly or quarterly investment plans for ETF<\/td><td>Investment in a mutual fund can be done as a lump sum or via an <a href=\"https:\/\/www.tickertape.in\/blog\/what-is-sip\/\">SIP<\/a> or STP<br><\/td><\/tr><tr><td>Diversification<\/td><td>ETFs are moderately diversified. Based on the objective of the particular fund, managers decide on the level of diversification<\/td><td>Mutual funds provide a broader diversification option as the portfolio is actively managed by a fund manager who makes the important changes based on the funds\u2019 performance and average returns of the fund<\/td><\/tr><tr><td>Cost of investment<\/td><td>ETFs charge several fees such as brokerage fee and commissions&nbsp;<\/td><td>Mutual funds attract various <a href=\"https:\/\/www.tickertape.in\/blog\/information-on-expense-ratio\/?utm_source=blog&amp;utm_medium=article\">charges<\/a> such as load fees asset management fee, and account fee&nbsp;<\/td><\/tr><tr><td>Lock-in period<\/td><td>Since ETFs are bought and sold like stocks during the trading hours, you can sell a fund at any given time<\/td><td>While open-ended funds don\u2019t have a maturity period, close-ended funds come with a maturity period ranging from 2-15 yrs. <a href=\"https:\/\/www.tickertape.in\/mutualfunds\/nippon-india-tax-saver-elss-fund-M_NITC?utm_source=blog&amp;utm_medium=article\">Equity linked saving schemes<\/a> (<a href=\"https:\/\/www.tickertape.in\/blog\/information-on-tax-saving-mutual-funds\/?utm_source=blog&amp;utm_medium=article\">ELSS<\/a>) have a lock- in period of three years.&nbsp;<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>Now that you have read through this article, you may have grasped a fair understanding of the two asset classes and their differences. A few other things to keep in mind before investing in either of the asset classes would be the age, time horizon, trading volume, liquidity, <a href=\"https:\/\/www.tickertape.in\/blog\/information-on-expense-ratio\/\">expense ratio<\/a> and a low tracking error. In other words, it is imperative that you evaluate your personal needs and do thorough due diligence before investing in any fund.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Confused between ETFs and mutual funds? Click here to read about the meaning of ETFs and mutual funds, and their differences<\/p>\n","protected":false},"author":53,"featured_media":3743,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"_lmt_disableupdate":"no","_lmt_disable":"no","footnotes":""},"categories":[8],"tags":[289,480,78],"acf":[],"modified_by":"Aradhana Gotur","jetpack_featured_media_url":"https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2021\/08\/ETF-VS-Mutual-funds.png?wsr","_links":{"self":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/3742"}],"collection":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/users\/53"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/comments?post=3742"}],"version-history":[{"count":6,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/3742\/revisions"}],"predecessor-version":[{"id":8649,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/3742\/revisions\/8649"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media\/3743"}],"wp:attachment":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media?parent=3742"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/categories?post=3742"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/tags?post=3742"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}