ETF Investing 101
ETFs vs. Mutual Funds
Both ETFs and traditional mutual funds are popular choices for investors seeking diversification and convenient access to a wide range of asset classes. But there are important distinctions to consider.
Where Can I Go to Invest?
Contact a Financial Advisor
Consult with your financial advisor to explore how Global X ETFs may fit your investing objectives.
Buy Online
Invest in Global X ETFs online through any leading brokerage platform with access to U.S. stock exchanges.
Expense Ratios & Fees
Tax Efficiency
Transparency
Flexibility
Minimum Investments
Expense Ratios & Fees
ETFs are typically offered at lower expense ratios, on average. However, there may be additional costs, such as brokerage fees.
Traditional mutual fund expenses are slightly higher than ETFs, on average, potentially including 12b-1 fees and load in/out fees, in addition to management fees.
Tax Efficiency
ETFs are generally more tax efficient than traditional mutual funds, as they typically generate fewer capital gains for investors. This is largely due to their ability to use an in-kind creation/redemption process to limit the amount of taxable events. That said, some ETFs may also use a standard cash creation/redemption, which could make them less tax efficient than ETFs that exclusively use an in-kind creation/redemption process.
Traditional mutual fund managers can take measures to minimize taxes, though sales within the portfolio may cause shareholders to be subject to capital gains taxes each year, even if they have an unrealized loss on their overall investment.
Transparency
ETFs are generally required to disclose their holdings on a daily basis. Traditional mutual funds and some ETFs are only required to disclose their holdings quarterly.
Flexibility
ETFs trade on an exchange during market hours (similar to a stock), enabling investors to buy and sell ETFs on an intraday basis, providing access to the market and their investments throughout the trading day. ETFs are bought and sold at the market price, which fluctuates based on trading activity. Because of their similarities with stocks, investors can also buy ETFs with limit orders or utilize stop-loss orders.
Traditional mutual funds do not trade all day; they are only available for purchase or redemption once per day, with all of that day's orders being executed at the same price.
Minimum Investments
ETFs are purchased in shares at market price, just like individual stocks. As a result, investors can get started buying a single share or even a fraction of a share, typically for less than $100 — and often much lower.
Traditional mutual funds often have higher minimum initial investments, sometimes reaching into the thousands of dollars.
Subsequent mutual fund investments may not have a minimum to meet.
Frequently Asked Questions
When it comes to investing, there is a lot to unpack — explore how ETFs can help.
