While both ETFs and mutual funds are essential investment vehicles, their management styles differ. That could be one of the reasons most people gravitate towards ETFs. Here is why investors prefer ETFs over mutual funds. For one, unlike the active management of mutual funds, you can passively sit back, tracking the market index, akin to trading in stocks. But what makes the ETFs even more attractive than mutual funds is that their expense ratios are much lower than the mutual funds.
Besides the lower fees that enable you almost unrestricted access to your investment, you can also buy your ETFs in bits and fractions. Thus, you do not need to buy a whole unit to begin the journey to financial goals. Moreover, even when you are limited in funds, you can still buy the ETFs based on indexes.
Another more significant plus for ETFs is that you can trade throughout the day, enabling you to monitor fluctuations as trading is happening. Everything is real-time, including when you buy an ETF, you purchase it at the current market price.
Although investing in ETFs is more practical due to lower fees, mutual funds and ETFs are critical and robust investment choices that can complement each other.
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