Is there more risk investing in ETFs compared to mutual funds?

Question

I still don't completely understand the concept of ETFs...

Answer 1

ETF's (exchange traded funds) are essentially mutual funds that are traded on the stock market. Thus their price fluctuates throughout the day, much as a stock does. You can sell an ETF at any point in the day for the going price.

A mutual fund, on the other hand, is only valued at the end of each day. If you want to sell it, it will be sold at the price that it is calculated at at the end of the day, regardless of what the stocks that comprised it might have been earlier.

There really is no more risk in ETF's than in mutual funds, but there is more control in when to sell with ETF's.

Answer 2

There is no more "risk" in an ETF vs a Mutual fund assuming they are both holding the same stocks. For example, the ETF SPY vs. a S&P 500 index Mutual Fund.

The differences are these:

1) You can by and sell ETFs like a Stock and pay commisions as if buying stocks. Mutual Funds have a set price at the end of each trading day and do not trade throughout the day. Commisions (loads) on Mutual funds vary but is ussually a one-time fee.

2) Typically management costs for ETFs are lower than mutual funds. Especially actively managed mutual funds. Index Mutual Funds may have similar low fees like ETFs.

3) Because of the commisions differences its ussually cheaper to buy an ETF if its a one time buy. However, if you would like to purchase additional ammounts of the fund over time (like monthly) then the mutual fund will be cheaper.

Answer 3

ETF's are basically mutual funds like others have said BUT, they are basically INDEX mutual funds. Several companies are working on activally managed ETFs. So an ETF of only one sector will have more risk than a well diversified mutual fund, and vica versa.

Answer 4

there are risks in any investing that you do. ETF's mimic the market in which they are following. Example would be if you were investing in the ishare japan fund, if the nikkei were to crash your fund would too.
Mutual funds pool there money together in sectors also. Some are tech mutual funds and some are small growth, etc..If those sectors preform poorly than your fund would preform poorly. Thats why they have prospectus. READ THEM!!! and see what the potential risk.

Answer 5

They are both crappy investments, stay with individual stocks to get the best returns. ETF's and mutual funds for old ladies, losers, and dummies.

Answer 6

I have owned both and there is a HUGE difference in the two.

The first is ETF are treated like stocks meaning you can trade them at anytime. Funds are only traded once at whatever the price at 4pm (usually announced at 6pm) is.

The second is ETF's are way cheaper than most funds in the way of yearly expenses especially in the "specialty markets ie asia, gold, oil whatever) ture you pay a commission fee for buying and selling the etf but that cost is usually offset with the lower expense fees.

Third there IS MORE RISK in ETF's Especially in special areas like USO (oil) Another Saudi babble and the etf loses a dollar or more. With more risk there IS MORE REWARD. XLE (energy fund) the link is a 5 day chart on the price of it. http://moneycentral.msn.com/investor/charts/chartdl.aspx?CP=0&PT=1&CE=0&C7=1&ComparisonsForm=1&D4=1&ViewType=0&D5=0&DateRangeForm=1&ShowChtBt=Refresh+Chart&D3=0&C6=2007&PeriodType=20&C5=1&Symbol=US%3AXLE&C8=2007&C9=2&DisplayForm=1

by comparison this is US investors global resource. http://moneycentral.msn.com/investor/charts/chartdl.aspx?CE=0&C7=1&ComparisonsForm=1&D4=1&ViewType=0&D5=0&DateRangeForm=1&ShowChtBt=Refresh+Chart&C6=2007&3=0&C5=1&Symbol=PSPFX&C8=2007&C9=0&DisplayForm=1&CP=0&PT=3

one BIG drop after that very little movement

for more on ETF's look here

http://moneycentral.msn.com/investor/research/etfwelcome.asp?ETF=true

oh by the way xeno my lone mutual fund gain 22% LAST YEAR and my etf's averaged 15% so much for your LOSER theory.

Answer 7

No.

ETF is a box of shoes with many stocks inside.

You can buy or sell your box.

You cannot open the box to sell a few stocks.