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Index Funds vs. Mutual Funds vs. ETFs (Differences + How to Choose!)
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- Опубликовано: 13 авг 2024
- What are the differences between index funds, mutual funds, and ETFs (exchange-traded funds)? What is an index fund vs. a mutual fund? Mutual fund vs. ETF? ETF vs. index fund? What makes these fund types similar, and what makes them different than picking stocks? Index funds, mutual funds, and ETFs are the 3 main fund types you can invest in in the stock market. All 3 of these fund types refer to a collection of professionally managed individual stocks or bonds. By investing in an index fund, mutual fund, or ETF, you are investing in a tiny sliver of a bunch of different stocks, usually in one category or sector of the stock market. The main benefit of investing in an index fund, mutual fund, or ETF is the diversification. There is less risk to the investor when one stock or company declines, because there are many other stocks driving the performance of that fund. This video discusses the similarities and differences between mutual funds, index funds, and ETFs.
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🕒 TIMESTAMPS 🕒
0:00 - What are index funds, mutual funds, and ETFs? // Similarities
2:11 - Mutual funds vs. index funds // Differences
5:42 - ETFs vs. mutual funds and index funds // Differences
8:09 - Summary // Conclusion
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Disclaimer: I am not a financial advisor nor a tax professional. The content presented in this video is for entertainment and educational purposes only.
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This is the first time I started to understand stocks. Good work!
Nice breakdown alex! Great for beginners 👊🏼💯
Thank you!
Great channel with straight forward and easy to understand information. Keep up the great work!
That means a lot - thank you so much!
Outstanding job on this video, very clear and to the point.
Great video
Great video. As someone currently learning the ropes of investing, this is really appreciated. Index funds all day, everyday.
Thank you so much! I totally agree. Whether they're structured as a mutual fund or ETF really doesn't matter. You can't beat the low fees of index funds and long track record of outperforming actively-managed funds.
@@AlexRaePersonalFinance I have been outperforming even the S&P 500 Index these days.
Simple and clear explanations and breakdowns. Keep the good work Alex...
ETFs are the best way to get started if you know nothing and have very little. Wish I would’ve started there instead of the pot stock bubble 😅
Yes, I'm so glad I felt overwhelmed by individual stock picking when I first started out, because I ended up buying ETFs solely for their simplicity. It ended up being the smarter option for me anyway!
Thank you for another wonderful video covering a topic that I know myself and many, many others struggle to understand! :)
Thank you!! I appreciate the kind words. :)
Hey great explanation. I love ETF's from Vanguard.
Thanks for watching!
Awesome! Love the pace and complimentary images. I feel like I can explain this all to someone now.
Thank you so much, I really appreciate it!
Love love love this channel! I just stumbled across it and I'm recommending it to everyone I know. Thanks for all of the help! Very much appreciated
Excellent presentation!
Appreciate the help. ✌️
Thank you so much! This was so helpful.
I'm so glad you enjoyed it! Thanks for watching.
Great breakdown! Thanks!
Thank you for watching!
Great videos! Keep posting!
Thank you!
Great video it really taught me a lot. I opened a Roth IRA account today and I’m currently 17 year old. I plain for long term growth would u recommend investing more into index funds then mutual funds? Also how would I be able to calculate my annual return?
That's a great plan! Either option is good, but I personally prefer index funds, especially for beginner investors, because the minimum investments required are usually much lower and the fees are lower. I personally like index ETFs better than index mutual funds, but the differences are so small.
@@AlexRaePersonalFinance thank you so much for the response. I planned out my portfolio with more 90% stocks(Index and ETF) and 10% Corp bonds. Let’s hope the future is bright for both of our accounts.
@@anthonytadros3454 That's awesome! This is NOT investment advice, but personally, I decided to not include bonds in my portfolio until I'm closer to retirement. At a young age, you're 40+ years away from retirement and thus can afford to be a bit riskier with your portfolio. Most "traditional" retirement investing advice includes bonds in the portfolio because they were better-performing in the past, and people typically didn't start saving for retirement until their 30s/40s. Just some food for thought!
@@AlexRaePersonalFinance Thank you for the Tip. 🙂 I will definitely do more research on the current status of bonds and bonds for the future. Thanks again and have a awesome day!
Question
If I have invested $ 6k per year in Roth IRA in index s&p 500 and stock crashes what would be happen?
Well, let's say you purchase 6 shares of a stock at $1,000 each (for a total investment of $6,000). If that stock's value drops in half overnight, each share is now worth $500. You own 6 shares, so the value of your investments is now 6 * $500 = $3,000. Basically, you lost money. But if the next day the stock doubles in value, it goes back to its original $1,000/share and you're back at $6,000. So even though you lost money day 1, on day 2, you made it all back. But if you had sold on day 1, you wouldn't have had a chance to get back to your original value. Of course - that's the risk of investing - we can't predict how a stock will behave with 100% confidence. That's why I prefer index funds because there's less individual variability compared to investing in individual stocks. More diversification = less massive swings like the extreme example I just gave.
ETFs all the way for me.. Those fees add up and kill your profits. Inflation is already eating up you$ each year so why give any more back that you don't need to. Best of luck
Which one would be best for a Roth IRA between the 3 and which ones are the most popular? I'm assuming mutual funds as they are higher taxed, but since Roth isn't taxed, than its more advantageous?
It's interesting that you think that mutual funds out perform index funds (or in theory). Warren Buffett even has shown that this is not the case. People cannot predict the future. I can name several index funds that's always out performed the index it has followed year after year, for decades even. thank you for the videos
Warren Buffett has shown that index funds outperform mutual funds *overall,* but that doesn't mean an individual mutual fund will *always* do worse than an individual index fund. That being said, I prefer index funds for all the reasons I listed in the video.
Wich good investment for roth ira retirement fund? Beginners here and still learning how to earn and save for retirement. Thank you
What brokerage firm do you have your Roth IRA with and did you pick funds already?
@@orangemountain457 charles schwab
@@Cali_12024 The majority of my portfolio would be in SWTSW, then I would add SWISX for international diversification (I wouldn't do more than 40% of my portfolio in SWISX). I stay away from bond funds, I have a high risk tolerance so my portfolio consist of 100% stock funds. Do a search for: Reddit personal finance prime directive, it's a free resource I highly suggest you look up. Also check out the sidebar under 'Explore our wiki' for topics such as budgeting, retirement and investing.
@@orangemountain457 thank you
Hi JRN - I actually just released a video on a super simple investment approach called the Three Fund Portfolio! It's essentially what Orange Mountain described above. Feel free to check it out if you want more info. :) ruclips.net/video/mz9_Q0wPZrQ/видео.html
Will you be my personal "Index Fund?"
So basically they all the same shi..tt , just cross your fingers and pray you made the right choice with a minimum effort. Got it
😂😂😂