What is the difference between a mutual fund and an ETF?

Mutual funds and exchange-traded funds (ETFs) are baskets of assets that offer investors an easy way to diversify. Some mutual funds are open-end, meaning that an investor purchases the fund directly from the issuer and invests a minimum required amount.

ETFs are more likely to be passively managed and often track a particular market index. ETFs are traded in the same way shares of a stock in an individual company are traded and their price is determined by market forces. However, some types of mutual funds trade on the stock market like ETFs. These are called closed-end mutual funds.

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