The main distinction between these two types of investment vehicles is how they are purchased and sold. Mutual funds are priced daily, and you typically invest a set amount of money. Mutual funds can be purchased through a brokerage firm or directly from the issuer, but the key point to remember is that the transaction is not immediate.

ETFs, on the other hand, trade on major exchanges like stocks, such as the NYSE and Nasdaq. Instead of investing a set amount of money, you choose how many shares to buy. ETF prices fluctuate throughout the trading day because they trade like stocks, and you can buy shares of ETFs whenever the stock market is open.

Exchange-Traded Funds (ETFs) and mutual funds are both investment vehicles, but they differ in several key aspects. One significant distinction is their trading mechanism. ETFs are traded on stock exchanges like individual stocks, allowing investors to buy and sell them throughout the trading day at market prices. In contrast, mutual funds are bought and sold through the fund company at the end of the trading day at the net asset value (NAV) price.

Another difference is the management style. Most ETFs passively track an index, aiming to replicate its performance, while mutual funds may be actively managed, with fund managers making investment decisions to outperform the market. Additionally, ETFs often have lower expense ratios than actively managed mutual funds.

Furthermore, mutual funds may have minimum investment requirements, whereas ETFs are traded in shares like stocks, making them more accessible for investors with varying budget sizes.