Index Funds vs. Mutual Funds vs. Exchange Traded Funds
While learning the basics of stocks and bonds, IFW Thought Leader David Adefeso says, “You should become familiar with the different types of mutual funds, index funds, and exchange-traded funds.”
- Mutual funds are a collection of stocks or bonds purchased together. They tend to be more expensive than the index and exchange-traded funds as a fund manager oversees them.
- Index funds are like mutual funds but with one key difference. While index funds are also a collection of stocks and bonds purchased together in an umbrella, they are not managed by anyone.
- Exchange-Traded Funds, or ETFs, are a collection of stocks or bonds purchased together under an umbrella but are passively managed. While mutual funds can only be purchased or traded once a day, you can actively trade exchange-traded funds throughout the day.
While all options have pros and cons, it is best to speak with a personal financial planning professional like David Adefeso. A professional can assist you as you start to invest in stocks and bonds to generate passive income and diversify your investment portfolio. The IFW has hundreds of financial planning professionals that can help you create a qualified retirement plan and investment portfolio. Check out all the financial education and resources available for you!
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