New Investors: ETFs, Index Funds, and Mutual Funds. What's the difference? And which one is best for my portfolio?
What are ETFs, Index Funds, and Mutual Funds? This will be easy to understand. ETFs, Index Funds, and Mutual Funds are all essentially the same but with different perks. So let's start with the basics. As the saying goes, "Don't put all of your eggs into one basket.",with this analogy, we begin to understand the purpose of these funds. Types of Funds Index Funds and Mutual Funds: A mutual funds, and a index funds are one entity that is traded on the market. They are like mini portfolios or sub-portfolios that are investing into a group of stocks. In example: If you hired someone to go to the shoe store and bring back 5 pairs of shoes for you to wear, that would be the start of an index or mutual fund. The difference between the two funds are as the example continues: If I hired that person because he follows the up an coming fashion trends and actively swaps out the 5 shoes to keep up with the next hottest shoes, than you can