Intro

Global investors often turn to mutual funds and exchangetraded funds (ETFs) to save for retirement and other financial goals. Although mutual funds and ETFs have similarities, they have differences that may make one option preferable for any particular investor.

Mutual Funds:

A mutual fund is an open-end investment that pools money from many investors and invests the money in stocks, bonds, short-term money-market instruments, other securities or assets, or some combination of these investments. The combined securities and assets the mutual fund owns are known as its portfolio, which is managed by an SEC-registered investment adviser. Each mutual fund share represents an investor’s proportionate ownership of the mutual fund’s portfolio and the income the portfolio generates.

ETFs

Exchange Traded Funds is type of investment that are traded on stock exchanges. Like mutual funds, ETFs are registered investment companies that offer investors a way to pool their money in a fund that makes investments in stocks, bonds, other assets or some combination of these investments and, in return, to receive an interest in that investment pool. Unlike mutual funds, however, ETFs do not sell individual shares directly to, or redeem their individual shares directly from, retail investors. Instead, ETF shares are traded throughout the day on national stock exchanges and at market prices that may or may not be the same as the NAV of the shares.

How Mutual Funds and ETFs Can Provide Returns to Investors

1. Dividend Payments


2. Capital Gains Distributions


3. Increased NAV/Increased Market Price