What is an ETF?

Similarities between ETFs and mutual funds

Diversified

Diversified

You get a diversified collection of stocks and/or bonds, which can potentially help reduce risk compared to individual securities.

Professionally managed

Professionally managed

The funds are overseen by professional managers.

Choice

Choice

Market risk is tied to the underlying holdings just like mutual funds.

Differences between ETFs and mutual funds

Fees

Fees

ETFs typically cost less than a comparable mutual fund. iShares ETFs cost 1/3 less than the average actively managed mutual fund.1

There are no loads or hidden fees. Your broker may charge a transaction fee, though many iShares ETFs are available commission free at providers like Fidelity.2

Taxes

Taxes

On average, the tax costs for iShares ETFs are less than half that of the typical mutual fund.3 Read more.

Fund performance

Fund Performance

iShares Core ETFs have outperformed over 80% of their mutual fund peers on average over the past five years.4

Most ETFs seek to closely match the performance of an already established stock or bond market index.

On the other hand, active mutual funds typically try to beat the market, which is hard to do – especially after fees and taxes.

Buying and selling

Buying and Selling

Like stocks, you can buy and sell ETFs at the market price whenever the market is open. Mutual fund shares are purchased directly from the fund at Net Asset Value (NAV) and priced once a day at 4:00 pm EST.

Knowing what you own

Knowing What You Own

Because ETFs usually aim to track an index, their holdings change relatively little over time – without the "style drift" that has surprised mutual fund investors in the past.

Learn more about the differences