Both pool your money with other investors and buy a basket of assets. The differences come down to cost, taxes and how you trade them.
This used to be a back-of-the-envelope job. Now it is one tap, but the logic has not changed. Both pool your money with other investors and buy a basket of assets. The differences come down to cost, taxes and how you trade them.
ETFs average 0.16% expense ratio; mutual funds average 0.42%. Over 30 years that gap costs six figures.
ETFs trade like stocks all day. Mutual funds price once at market close.
ETFs rarely trigger capital-gains distributions; mutual funds often do, even if you didn't sell.
Are index mutual funds OK? Absolutely — Vanguard's flagship index mutual funds match ETFs on cost and beat most active funds.
Can I lose money in either? Yes. Diversification reduces risk; it does not eliminate it.
Whatever number you land on, sanity-check it against a second method or a quick estimate in your head.