ETFs vs Mutual Funds

How do ETFs differ from traditional mutual funds?

  • ETFs are listed on an exchange, such as NYSE Euronext’s Arca and can be bought and sold throughout the trading day. Many mutual funds are not listed continuously and can only be traded once a day.
  • The market value of the invested capital (indicative Net Asset Value) is calculated and disseminated by NYSE Euronext every 15 seconds.
  • ETFs follow the performance of their reference indices very closely. The unique process of creation and redemption ensures that the tracking error in relation to the reference index is very small.
  • Because ETFs follow the reference index, they provide some assurance with regard to expected yields, and management costs are lower. Traditional mutual funds, by contrast, try to outperform benchmark indices.
  • ETFs can be used as the underlying for options and futures.