Quote:
Originally Posted by LuvtheVillages
An ETF is a basket of stocks, often with some common feature. It is NOT managed. The basket of stocks remains the same through all the ups and downs. It is up to you to decide if this particular basket contains things you would like to own.
A mutual fund is a basket of stocks that IS actively managed. Some smart person (or computer) buys and sells different securities based on what he thinks will be most profitable. The mix can (and does) change frequently.
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Not exactly. For example, Vanguard has an S&P 500 Index mutual fund and also an S&P 500 ETF. Both investments are designed to mirror the S&P 500 index. They are not actively managed, but the manager of both needs to buy and sell stocks within the mutual fund or the ETF to match the index. Mutual funds can be actively managed or not. The same is true for ETFs.