ETFs and mutual funds are both baskets of securities that offer diversified investment exposure for investors. They both have a stated investment objective, and can be both active or passive. Their value is derived from the underlying assets held by the ETF.

However, there are a few key differences between the two investment vehicles. Mutual funds trade once per day, after the market closes, at one specific price, whereas ETFs trade throughout the day at various prices on an exchange, like stocks. Based on the structure of the specific fund, ETFs are generally considered more tax efficient than mutual funds as they rebalance their holdings more frequently, reducing the taxable events in the fund. Also, due to more efficient management and distribution structure ETF’s tend to have lower fees than mutual funds.