In spite of their similarities, there are some key differences between ETFs and mutual funds.
Mutual Funds and ETFs
Exchange-traded funds (ETFs) combine the diversification of mutual funds with the liquidity of individual investments, which is one reason they have attracted investors in recent years. ETF assets have more than tripled since 2007, reaching $1.8 trillion by mid-2014. Still, that figure falls far behind the $13.1 trillion of assets invested in mutual funds.
Both ETFs and mutual funds are portfolios of securities assembled by an investment company. Their underlying investments are typically selected to track a particular market index, asset class, or sector — or they may follow a specific strategy. You might invest in both types of funds to create a broad core portfolio or to target narrower market segments.