Mutual Funds and ETFs

Comparing ETFs and open-ended mutual funds

Exchange-traded funds	Open-ended mutual funds
Buying and selling
ETFs are continuously priced throughout the trading day, and investors buy and sell them in the secondary market (i.e., the stock market) ETF investors place orders through a brokerage account; this allows them to place different types of orders such as limit, stop-limit or short-sale, and to trade on margin	Investors transact directly with the mutual fund company Mutual fund investing does not require a brokerage account Investors cannot buy mutual funds on margin, or set price limit orders
Pricing
Share prices fluctuate during the day on a stock exchange and have bid and ask prices Prices may trade above (premium) or below (discount) the NAV	All shareholder orders receive the same daily price – the NAV – calculated at 4:00 p.m. Eastern time

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