ETF vs Mutual Fund: What is the difference between the two, which is the best investment option for you, know complete details..

ETF vs. Mutual Fund Difference: Nowadays, there are so many investment options available in the market that most people have the problem of where to invest their money. Among these, there are mutual funds and exchange-traded funds (ETF) investment options, which have many similarities but there are also differences between the two.

Today we will tell you what is the difference between mutual funds and ETFs and which one is better for you. But first, let us understand in simple words what are mutual funds and ETFs.

What is a mutual fund?
A mutual fund is a professionally managed investment scheme, usually run by an asset management company that invests people's money in stocks, bonds, and other securities.

What is ETF?
Exchange-traded funds (ETFs) are a combination of the characteristics of mutual funds and stocks. Just like you trade stocks in the stock market, you can also trade in ETFs.

ETF Mutual Funds
You can buy and sell ETFs on the same exchanges as stocks. Mutual funds are generally purchased from fund houses or through authorized intermediaries.
ETFs can be bought or sold at the current market price at any time during market hours. Whereas mutual fund units can be bought and sold anytime. It is determined as per Net Asset Value (NAV) rules.
There is no minimum lock-in period for ETFs.

Mutual funds also do not have a lock-in period but may have an exit charge that is charged for early redemption.

ETFs are generally passively managed. Mutual funds can be either active or passive depending on the type and structure of the fund.

Which one is better for you?
If you want to create a diversified investment portfolio then both these options can be a good option for you. Depending on the time period, risk appetite, and financial goals, you can decide which one is better for you. Some investors give more preference to liquid investments than long-term investments.