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What Are ETFs and Index Funds?
How Do ETFs Work?
ETFs are baskets of securities selected by professional fund managers to meet certain objectives.
Price Fluctuations
ETF prices might fluctuate throughout the day, just as stock prices do.
However, most ETFs are passively managed.
Keep in mind that an ETF is a company in its own right.
How Do Index Funds Work?
This hands-off management approach results in lower fees compared to actively managed funds.
Mutual funds dont have share prices, per se.
They have net asset values or NAVs.
As with an ETF, your investment in an index fund is an investment in the fund itself.
You dont own the securities within the fund.
Pros and Cons of ETFs
ETFs have pros and cons you should consider before you invest.
ETFs are the better choice for investors who want the option to actively trade their investments.
Investors who want to set and forget their investments are better off with index funds.
That makes them a good choice forlong-term investments, and possibly even as core holdings in your portfolio.
ETFs are the more flexible of the two and allow for active trading.
But index funds simplicity might make them more attractive to set-and-forget investors.
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