Olde Hornet
Well-Known Member
http://www.schwab.com/insights/etfs/whats-etf?cmp=em-QYB
Rick Karr:
Exchange-traded funds and mutual funds have a lot of similarities. But there are also some key differences.
Michael Iachini:
When you place a trade in a mutual fund, you can say, “I want to put $5,000 into this fund,” or whatever amount you want. And at the end of the day, the fund manager figures out how much all the stocks or bonds that they own are worth. And they say, “All right, on a per share basis, that’s $10 per share.” And they figure out how many shares your $5,000 buys you, and they give you those shares. So nothing actually happens with your investment until the end of the day.
Trading shares of an ETF, on the other hand, is a lot like trading shares of a stock. So, ETFs trade on exchanges. That’s why they’re called exchange-traded funds. And they’ll have a ticker symbol, and you can enter that in and place a trade at 10:30 in the morning and say, “I’m going to buy now,” or “I’m going to sell at 11:15.” You can set a limit price. You can trade on margin. So you have a lot more trading flexibility with ETFs than you do with mutual funds.
Rick Karr:
Exchange-traded funds and mutual funds have a lot of similarities. But there are also some key differences.
Michael Iachini:
When you place a trade in a mutual fund, you can say, “I want to put $5,000 into this fund,” or whatever amount you want. And at the end of the day, the fund manager figures out how much all the stocks or bonds that they own are worth. And they say, “All right, on a per share basis, that’s $10 per share.” And they figure out how many shares your $5,000 buys you, and they give you those shares. So nothing actually happens with your investment until the end of the day.
Trading shares of an ETF, on the other hand, is a lot like trading shares of a stock. So, ETFs trade on exchanges. That’s why they’re called exchange-traded funds. And they’ll have a ticker symbol, and you can enter that in and place a trade at 10:30 in the morning and say, “I’m going to buy now,” or “I’m going to sell at 11:15.” You can set a limit price. You can trade on margin. So you have a lot more trading flexibility with ETFs than you do with mutual funds.