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What’s the difference between a mutual fund and an exchange-traded fund?
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The most fundamental difference between a mutual fund and an exchange-traded fund (ETF) is that a mutual fund is a pooled investment vehicle that can be actively managed by a professional fund manager, while an ETF is a passively managed, index-tracking instrument that trades on an exchange, similar to a stock. Mutual funds typically have more diversified holdings, meaning a high degree of safety, but come with higher fees. ETFs are generally more cost effective than mutual funds, as they have fewer fees and have the added benefit of being traded on a stock exchange, meaning that investors can buy and sell ETF shares intraday.