Asset Planning, Inc Blog

The latest from the team.
Font size: +
2 minutes reading time (347 words)

ETFs VS. Mutual Funds: What Are They & Why Use Both?

A blend of using both ETFs and mutual funds is beneficial for many reasons as each provides its own special advantages.
Mutual Funds are managed by investors who use the invested cash to purchase the holdings in the fund. Often there are fees and expenses that must be paid and the capital gain distributions are passed down to the investors. This is called an "in cash transaction". With this, all taxable capital gains are spread amongst all investors in the fund. When you purchase a mutual fund you are transacting directly with the fund and those trade just once per day after market close with all investors getting the same share price. The uniform treatment of mutual funds is the reason you never see ETFs in company 401k plans as regulations deemed employees must get the same share price & costs.
When ETFs (Exchange Traded Funds) are purchased, the money goes to the market maker, not a fund manager. The market maker then buys the securities the ETF manager allocates for that ETF. This is called an "in kind transaction". This type transaction is advantageous tax-wise as the ETF manager can exchange shares to the market marker without creating capital gains. ETFs are traded like regular stocks during the market hours. Their prices change during the day based on the supply and demand. Buying an ETF intraday could be better if prices are lower than at the close of the market. As well, when purchasing ETFs there is no minimum investment amount, whereas with a mutual fund there may be a minimum monetary investment required.
As your advisors we determine in what scenario it is best to use a mutual fund or ETFs in your accounts. For example, we might use an ETF in a taxable account to mitigate capital gains and a mutual fund in an IRA. Conversely, we might choose to use a mutual fund when superior investment strategies or fund managers are not offered as an ETF. While both have tradeoffs, using both ETFs and mutual funds can be a useful long term strategy.
Important Factors to Consider When Paying Off Your...
Capital Gains 2021

Search Blogs Module

Wait a minute, while we are rendering the calendar
blog post pet supplies Healthcare non-prescripstion sunglasses disaster areas team members earthquake app partner /owner tax filing deadlines October 1 2020. birth certificates hurricane Dorian ice cream information Facebook Medicare Advantage Medicare plan company Charles Schwab National Ice Cream month settlement options April 18 2017. payments CA FTB portal spam phone FEMA website Shred paperwork pet industry driver license offering insurance Notary Public Auto insurance text messages Social Security contribution limit Joey Gonzales summer pet cell phone provider prescription eyeglasses July 4 insurance policy Open House integral member IRS deadline rescue organizations increase Fox News story Kraig Mathias Treasury Department consumer spending official certification Brexit vote VOIP landline phones emergency folder cell phone carriers asset Planning 20 year anniversary house sitter IRS illiegal robocallers 23 andme credit cards emergency kits identity theft July 6 Retirement Contribution Limits 2018 IRA contributions Economic Security fees cell phone service provider Expired medications debt Orange County Superior Court trustee home emergency kit vacation vision screening tax season April 15 privacy settings people medications credit freeze business hours life saver car loans phishing sites water … president Trump interest cell phone SIM swap scam Flexible Spending Account Two-Step Verification chip-enabled EMV cards February 14 spring cleaning trust estate insurance policies interest rates retirement plans Amazon check lists wells Fargo September 8 family members CFP ® borrowing money September 30 2020. Medicare donation counts earnings fallout memorial Day weekend Wells Fargo employees Medicare question fun facts Facebook profile 2017 TD Ameritrade National LINC Conference credit card fraud fun atmosphere 2017 IRA contributions January 10 Mobile Banking Security Tips Victor Dergunov jury duty Part D premiums . paperwork clutter flash drive Asset Planning home emergency preparedness kits privacy notices stock pile Wells Fargo customers tax records phone companies Roth IRA CARES Act clients clone counterfeits phishing scams EEChecklist-Kits.pdf stockpilingchecklist.pdf money email notifications phone documents Ice Cream Social Coronavirus Aid markets credit monitoring service cell phone carriers offer coronavirus retirement information paper records Part B student loans 900 number pets identity thieves estate planning https :// emergency kit card reader client portal 2017 Equifax breach policy health care services bottom line toilet paper web address self-help topics Affordable Care Act padlock Medicare Part B premiums home April 11 banking ice cream event market turmoil media accounts clients show support retirement accounts opt-out tax returns July 3 rd retirement planning credit card company operations manager DNA test kits home mortgages scams Supplemental Security Income assets breach pet donation drive Financial Planning Magazine Medicare Part B app Labor Day July weekend D premiums California Lions Friends relief efforts Federal Trade Commission website 70 1/2. June 29 executive order health care costs estate planning direction 401K CERTIFIED FINANCIAL PLANNER exam news coverage checklists tax deadline IRA accounts spread Legal robocalls stimulus package records COVID -19 virus home security notary services Puerto Rico Orange County drive /usb account numbers gap insurance FSA ID card Independence Day cell phones items parking spots investment statements Social Security Administration home break-ins years tax deadlines https ://seekingalpha credit score Open Enrollment holidays approach donation items 4 pm -8pm Kiplinger Letter Erin Nelsen September 9 TD Ameritrade “ skimmer ”.