Compare
| ETF | Mutual Fund | Individual Stock | |
|---|---|---|---|
| Diversification | High (one share = many stocks) | High | None (one company) |
| Trading | All day at market prices | Once per day at NAV | All day |
| Fees | Index ETFs 0.03-0.20%; active ETFs 0.5%+ | Index funds 0.02-0.20%; active funds 0.5-1.5% (the driver is index-vs-active, not the wrapper) | None (just commissions) |
| Tax efficiency | High (in-kind creation) | Lower (capital gains distributions) | You control timing |
Key point
The three most popular ETFs: SPY (S&P 500), QQQ (Nasdaq 100), VTI (total US market). Together they hold trillions in assets.
Try it
Look up **SPY** and notice how the platform shows holdings, sector breakdown, and expense ratio. This data is unique to ETFs.
Key insight
Check-in
An ETF and a mutual fund both track the S&P 500. What's the MAJOR operational difference?
Check your understanding
Sit with the ideas.
What is a key advantage of ETFs over mutual funds?
Why:
Try this in paper trading
Build a 3-ETF starter portfolio
Allocate $25,000 of your paper cash across three ETFs: a broad-market index (e.g., VTI or SPY), an international fund (e.g., VXUS), and a bond fund (e.g., BND or AGG). Pick the weights you'd actually hold for the next decade.
Open paper portfolio →Practice mode — simulated trades, not investment advice.