Are mutual funds better than ETFs?

Not necessarily. Each financial product has its strengths and weaknesses. Any fair comparison should be done in the context of not just performance, but tax efficiency, fees/total ownership costs, risks, structural differences of each product and if the fund objectives match the financial objective(s) of a particular investor. Always refer to a prospectus for detailed information before investing.

Are mutual funds less risky to own than exchange traded funds?

Not necessarily. ETFs, like mutual funds, come in a variety of shapes and sizes. The level of risk in an ETF or mutual fund is often determined by the portfolio holdings within the fund. Both mutual funds and ETFs can track a variety of indexes and sectors. Some indexes or sectors will be more risky and volatile than others. However, there's no substantiated research to prove that ETFs are any more or less risky compared to mutual funds.

How are mutual funds and ETFs different?

ETFs offer investors intraday liquidity and are bought and sold with a brokerage account. Mutual funds are priced at the end of the day and cannot be bought or sold during regular trading hours. Also, ETFs are traded on a stock exchange, whereas mutual funds are bought and sold directly with the fund company or through a mutual fund trading platform.

How does the cost of mutual funds compare to ETFs?

Generally, investors buying or selling ETFs will pay a transaction commission to a broker, whereas investors buying or selling no-load mutual funds directly from a fund company pay none. However, some brokers impose a commission to buy or sell no-load mutual funds. Other so-called "no transaction fee" mutual funds don't charge a commission to buy, but often carry higher expense ratios. Also, ETFs do not impose back end redemption charges like many mutual funds.

Ultimately, any fair cost analysis between ETFs and mutual funds should look at the total spectrum of expenses - not just the transaction fee to acquire the ETF or mutual fund. Pay close attention to the expense ratio, portfolio turnover, and tax efficiency of a mutual fund versus an ETF. Always refer to a prospectus for detailed information before investing.