ETF Education Center - FAQs
ETFs vs. Mutual Funds
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.
Return To TopAre 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 determined by the portfolio holdings within the respective fund. Both mutual funds and ETFs can track a variety of indexes and sectors. Some indexes or sectors will be more volatile than others. However, there’s no substantiated research to prove that ETFs are any more or less risky compared to mutual funds.
Return To TopHow 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.
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.
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Any specific securities, or types of securities, used as examples are for demonstration purposes only. No information on this Web site should be considered a recommendation or None of the information provided should be considered a recommendation or solicitation to invest in, or liquidate, a particular security or type of security.
Investors should consider the investment objectives, risks, charges, and expenses of an ETF carefully before investing. For a prospectus containing this, and other important information, contact the fund company. The prospectus should be read carefully before investing.
Investors should consider the investment objectives, risks, and charges and expenses of a mutual fund carefully before investing. A mutual fund's prospectus contains this and other information about the mutual fund. Prospectuses are available through our trading site or through a Scottrade branch office. The prospectus should be read carefully before investing. No transaction fee (NTF) funds are subject to the terms and conditions of the NTF funds program. Scottrade is compensated by the funds participating in the NTF program through recordkeeping, shareholder, or SEC 12b-1 fees.
Investors should consider the investment objectives, charges, expense, and unique risk profile of an Exchange Traded Fund (ETF) carefully before investing. Leveraged and Inverse ETFs may not be suitable for long-term investors and may increase exposure to volatility through the use of leverage, short sales of securities, derivatives and other complex investment strategies. A prospectus contains this and other information about the ETF and should be obtained from the issuer. The prospectus should be read carefully before investing.
Margin trading involves interest charges and risks, including the potential to lose more than deposited, or the need to deposit additional collateral in a falling market. Margin Disclosure Statement (PDF) is available for download, or it is available at one of our branch offices. It contains information on our lending policies, interest charges, and the risks associated with margin accounts.
Options involve risk and are not appropriate for all investors. Detailed information about the risks associated with options can be found in the Scottrade Options Application and Agreement, Brokerage Account Agreement, or by downloading the Characteristics and Risks of Standardized Options and Supplements (PDF) from The Options Clearing Corporation, or by requesting a copy from your local branch office. Supporting documentation for any claims will be supplied upon request.
Market volatility, volume, and system availability may impact account access and trade execution.
Testimonials may not be representative of the experience of other clients and are no guarantee of future performance or success.