Are they the same or are they different.? well, they have a lot in common

The Active and passive story is the story of ETF and MF, but here too both of them cross each other. Let’s understand them in detail

The first Mutual fund was launched in 1924, ETFs were launched much later in 1993. Both have the objective to offer diversification to the Investor.  

Mutual funds primarily are active funds where fund managers make decisions regarding the allocation of the funds, whereas ETFs are generally passive in nature as they follow the indices, broad or sectoral.

Some of the Mutual funds are Passive – Index Funds, and some of the ETFs are now managed actively. In recent years many active ETFs have become popular.

Key Takeaways

• Mutual funds are Active Funds, they aim to beat the benchmark indices to create alpha for the Investor. Index Funds are managed Passively and have been popular in recent years.
  
  
• ETFs are Passive Funds; they generally follow broad market Indices or sectoral indices and allocate the funds as per the allocation to the Index. Some of the ETFs are actively managed too.
  
  
• A major difference between the both is ETFs can be bought and sold from the Exchanges just like a stock and Mutual funds can only be bought or sold at the end of day nav.
• Purchase and sale of Mutual fund is done with Mutual fund house by investor while ETFs are bought and sold between investors on the exchange.
  
  
• The costs of Mutual funds are high as it involves Active management compared to ETFs.
  
  
• For Investing in ETF you need a Demat Account whereas a Demat account is not mandatory for investment in mutual fund
  
  
• Market value of ETF fluctuates during the day like a stock, Net Asset value of Mutual fund is updated at the day end
  
  
• Underlying portfolio details of ETFs are published daily as compared to the Mutual fund factsheet which is disclosed on monthly basis.