Unless they’re living under a rock, most investors have heard about ETFs.

Imagine an investor is watching a financial news report and they’re hearing lots of information about ETFs – which is highly likely – ETFs saw record growth in 2020. $507.4 billion flowed into ETFs in 2020, which was 55% higher than the previous year.

Depending on how market savvy they are, investors may not understand the difference between ETFs and mutual funds.

Our friends at U.S. News & World Report broke it down in a user- friendly way. They focus on 3 key aspects:

  • ETFs charge lower fees.
  • ETFs are easier to trade.
  • Mutual funds are actively managed.

When trying to explain the difference to an investor, without using jargon, this is great place to start. Focus on these three aspects to help them understand the differences and decide which may better suit their needs.