ETF stands for exchange-traded funds. ETFs are a way to hold an extensive portfolio of different companies. They are like a mutual fund but are traded throughout the day like a stock.
A mutual fund is a type of fund that hosts a pool of securities for a specific allocation. They are centered around growth, sectors, or another kind of allocation.
Here are a couple of differences between the ETF vs Mutual Fund.
1. Active Management vs Passive Management
The mutual fund is usually actively managed, and their fund manager seeks to beat an index like the S&P 500. ETFs usually are more passively managed.
An expense ratio is an expense that is associated with the fund. If an expense ratio of 0.03%. That means it costs you $3 for every $10,000 invested into the ETF.