Why buy an etf instead of a mutual fund?

Exchange-traded funds (ETFs) take the benefits of investing in mutual funds to the next level. ETFs can offer lower operating costs than traditional fixed capital funds, flexible operations, greater transparency and better tax efficiency in taxable accounts. Mutual funds are generally purchased directly from investment companies rather than from other investors on an exchange. Unlike ETFs, they don't have trading fees, but they do entail an expense ratio and, possibly, other sales fees (or charges).

ETFs tend to have lower spending ratios than mutual funds because they offer minimal services to shareholders. While mutual funds may be a slightly more expensive option, fund managers provide support services. In addition to expert telephone support, mutual funds can offer free fund transfers, check issuing options, and other shareholder services that ETFs don't offer. Another important consideration is fiscal efficiency.

ETFs tend to be more tax-efficient than mutual funds because ETF shares are traded on an exchange instead of being traded with the mutual fund company, so there's a buyer for every seller. That may not be the case with an investment fund, and many sellers will have the mutual fund company sell shares of the underlying securities. This will have capital gains tax implications for all shareholders, regardless of whether they sell or not. The main difference between ETFs and mutual funds is that the price of an ETF is based on the market price and is only sold in full stocks.

However, mutual funds are sold on a dollar basis, so you can specify any dollar amount you want to invest. ETFs also tend to be cheaper than mutual funds. Mutual funds can pay distributions at the end of the year, while ETFs can pay dividends throughout the year. However, there is a difference in these payments to investors, and ETF investors also have an advantage in this regard.