ETFs are a way to invest in a group of stocks from a common index or market segment, such as Oil, Transportation and so on. Their growth and demand is the result of the popularity of the index funds, which actual shares of companies in a particular sector. Index funds can be difficult to buy and sell for a variety of reasons, especially considering the relatively high cost for each share, the cumulative commissions on those shares and the potential difficulties in trying to sell them when you want. For these reasons and more, ETFs have emerged as an attractive option for investors looking to acquire interest in a market segment while still being able to have an agile portfolio.
Mutual Funds are the cornerstone for most individual investors and anyone who has a 401(k) or Individual Retirement Account (IRA). Mutual funds are similar to ETFs in that the fund is made up of a wide collection of stocks, bonds or other securities. Mutual funds differ from ETFs in that a mutual fund contains similar classes or types of securities. For example, most mutual funds companies offer Growth, Large Cap, Small Cap, International and Municipal Bond funds, to name a few.