Investment Funds

What is the different between a mutual fund and an exchange traded fund (ETF)?

REPLY:

In a mutual fund (i.e. unit trust in Singapore), the transactions are priced based on the closing price of the underlying investment at the end of the trading day. If you transact, you will only know the price on the following day.

In a ETF, you can decide on the price to transact for this fund. Your transaction is carried out in the stock exchange. You have to find another party who is willing to trade with you based on that price. Usually, the price will follow the net asset value of the fund.

For investors who like to trade, a ETF is more suitable. For long term investors, a mutual fund is probably better (as the cost is lower).