So I'm sure this topic has been covered before on this board...but I just came in to a decent sized some of money after selling my old house and now I'm looking to invest it better than just having it sitting in a savings account. I've done a bit of research on the topic, but thought the folks here could help as well.

The basic question is what is the difference between the two and what are the pros/cons of each? My wife and I don't want to be too aggressive so I think this is the area we want to look at, but I'm really just not sure which to focus more time and energy on researching.

TIA for the help!

mutual fund is a "private" fund that owns many different companies, price is set at the end of the day and is managed by a fund manager. ETFs track certain indexes, like the S&P 500, but they are themselves traded.

In our ROTHs we own FCNTX. This is a fund owned by Fidelity and managed by William Danoff who is probably one of the better fund managers around.

Probably the most important difference to an investor like yourself is the fee structure between the two. As Ragoo stated, most ETF's just mirror indexes.. meaning there's little-to-no management and the performance simply matches the S&P500 or the like, so there are minimal fees. With actively managed mutual funds, there are usually front-end and/or back-end loads attached but there's also active management that could potentially lead to performance that beats index returns. There are also some no-load funds that have an account management fee instead, which is typically annual.

Really all depends on your goals for the investment, risk tolerance and even your time horizon plays a part in deciding between the two. Hope this helps.

I've been in FCNTX for several years. It's been really good.

Thanks everyone, very helpful and also appreciate the heads up on FCNTX.

Ragoo, I owe you a beer next time I see you

Open-end Funds are essentially pooled assets from shareholders that are invested according to their stated strategy. You buy in and redeem out of the fund at the funds net asset value (net assets/outstanding shares). While funds can close to new investors, they generally create and redeem shares as needed based off shareholder activity. As mentioned above, you can purchase different share classes which will have different sales charges/management fees associated with them. Contrary to what was said above, there are passive strategies in this category also.

ETFs are exchange traded funds. Similar to open-end funds, there are a lot of strategies and they can be either passively or actively managed. unlike open end funds, ETF shares trade on an exchange like a stock and their value can deviate from the NAV of the fund itself. Only "Authorized Particpants" can create or redeem shares of the fund (they can take shares off the market or create additional shares to trade on the market. As said above, ETF are usually passive strategies that strive to track the performance of an underlying index and, because of that, are usually cheaper.

Closed-end funds might he easiest described as a hybrid between an open end fund and an ETF. The strategy is created and then, similar to a stock, they have an IPO and list the shares on the market. Unlike ETFs the outstanding shares are set and can not be "adjusted by any type of authorized participant. Like ETFs, they trade at market price which can be higher or lower than the funds NAV. They can also, with shareholder approval reclassify as an open-end fund.

Correct me if I'm wrong

ETFs don't allow auto investments (my Vanguard doesn't seem to)

Mutual/Index funds do.

Autoinvesting is the holy grail of investing IMO. Merges behavior, forced savings, investing, and diversifying simultaneously.

So I'll always have indexes.