Differences between ETFs &
mutual funds

Despite certain similarities to index mutual funds, ETFs are different in a number of important ways:

Prices of ETFs change throughout the trading day as investors buy and sell, while the prices of mutual funds are set only once a day, at the close of trading

ETFs don't have to buy and sell shares to accommodate shareholder purchases and redemptions as mutual funds do, minimizing portfolio turnover and the potential tax consequences of capital gains or losses

ETFs can be bought and sold using traditional stock-trading techniques, including buying on margin, selling-short, and using stop and limit orders, though mutual funds cannot be

Here are some other ways that index funds and ETFs are different:

	ETFs	Index funds

Real-time quotes	Yes	No

Intraday trading	Yes	No

Commissions or sales charges	Yes	Sometimes

Shareholder Services	No	Yes

End-of-day NAV = Trading price	No	Yes

Commissions or sales charges to reinvest earnings	Yes	Sometimes

Buy on margin or sell short	Yes	No

Is it a UIT? Is it an ETF?
A unit investment trust (UIT), like an ETF, buys a portfolio of securities and sells units, or shares, to investors. Thereafter, the UIT shares then trade in the secondary market. In fact, there are just four UITs, all of which are commonly described as ETFs: the DIAMONDS trust that tracks the DJIA, the SPDR trust that tracks the S&P 500, the MidCap SPDR trust that tracks the S&P MidCap 400, and the QQQQ trust the tracks the NASDAQ 100. The biggest difference between the two structures is that ETF dividends can be immediately reinvested, but UITs can't reinvest dividends until they're distributed to shareholders.

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