Should I invest in an ETF or a Mutual fund?
Asked 4 years ago
I'm looking to start out with long-term investments, say for about 5 years. Which will give me the best return with minimum taxes? Also, should I go for dividend-paying and put the money back into the investment?
Andrew Moran
Monday, June 28, 2021
The exchange-traded fund (ETF) industry has exploded in recent years as more investors are unlocking the power of this investment strategy. While mutual funds are still a good tool to have for automated investing, ETFs are the superior option.
These three things are what separate ETFs over mutual funds:
- ETFs are less expensive to hold, with fees as low as 0.1% per year. Mutual funds can charge investors as much as 3%.
- ETFs trade like stocks in real-time, while mutual fund prices are always settling at the end of the session.
- ETFs are more diverse: they can be acquired on margin, sold short, traded like futures, and invested like options.
For novice traders, the fees are the most important component of ETF trading.
And, yes, dividend-paying ETFs are beneficial, particularly the ones that pay a monthly dividend!
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