Mutual Funds and ETFs are both popular ways to invest in many companies at once without buying each stock individually.
For example, the S&P 500 index includes 500 large U.S. companies. Buying one share of each company would cost you around $100,000 — not realistic for most people. Instead, you can buy a single share of a Mutual Fund or ETF that holds all of those companies, usually for as little as $100. This makes diversification simple and affordable.
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• ETFs trade like stocks - you can buy and sell them anytime during the day at market prices.
• Mutual Funds only trade once per day after the market closes.
• ETFs usually have no trading commission, and the “cost” is just a tiny spread between the buy and sell price.
• Mutual Funds often charge a trading fee ($10–$100) unless you’re investing directly with the fund company.
• ETFs are typically more tax-efficient. They rarely distribute capital gains, so you don’t get large surprise tax bills.
• Mutual Funds can create taxable events when other investors sell, which means you might owe taxes even if you didn’t sell anything.
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There’s no one “best” option. ETFs are usually cheaper, more flexible, and more tax-efficient. Mutual Funds can still make sense if you want to set up automatic contributions, don’t trade often, or are investing through a workplace retirement plan.
The most important factor is that you contribute to your investments on a systematic basis either by payroll deduction or a monthly recurring contribution/investment program. Automated savings is the recipe for success.
Integra Wealth is a fee-only, fiduciary advisor located in Cary, NC and Chattanooga, TN.
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