Daily Investment Tips

An ETF is similar to an open-end mutual fund in that they both offer investors a pool of securities that consist of stocks or bonds.

But the difference between ETFs and Mutual funds is like day and night

ETF Vs Mutual Funds – Difference in How they trade

The first difference between ETF and mutual funds is in how they trade. ETFs trade like a normal stock in the stock exchange. Their prices move up and dwon throughout the day, allowing ETF investors to buy and sell anytime the markets are open.

Mutual funds, on the other hand, settle at the close of business, meaning that investors must wait to redeem or buy based on a mutual fund’s net asset value after the close of business.

Tax Efficiency

ETFs also tend to be more tax-efficient because they typically generate relatively low capital gains from fund distributions. ETFs usually have lower turnover of securities because they are not required to sell securities to meet investor redemptions, like mutual funds. When a mutual fund sells securities, it must pass along the capital gains to shareholders, even though the shareholders have not redeemed their shares.

Difference In Fees

ETFs do not charge redemption fees, and typically have lower expense ratios than mutual funds. However, every time an investor buys or sells an ETF, he or she pays a brokerage commission. For aggressive traders, these brokerage fees can quickly exceed the lower annual fees that ETFs usually charge.

Mutual funds on the other hand charge a redemption fees, they also charge annual fees which can be based on your invested amount plus a share of your profits.

written by Constantine Njeru \\ tags: Capital Gains, Etf, Expense Ratios, Mutual Fund, Mutual Funds, Redemption Fees, Tax Efficiency

Taking a mortgage to buy a home can come with tax advantages that mortgage owners can take advantage off to lower their tax bill.

1. Interest on a mortgage is usually tax deductible. You can deduct the mortgage interest from your income taxes.

2. You’ll get a tax break on capital gains–if any–when you sell.

3. These tax breaks means taking that mortgage will costs you less, often a lot less, than renting.

For more information consult a tax attorney or accountant for specific details.

written by Constantine Njeru \\ tags: Capital Gains, Income Taxes, Mortgage Interest, Mortgage Tax, Tax Accountant, Tax Advantages, Tax Attorney, Tax Benefit, Tax Break, Tax Breaks, Tax Deductible