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For example, I see that this: Vanguard FTSE All-World ex-US Index Fund Investor Shares (VFWIX) is

Also available as an ETF and at a lower cost as an Admiral™ Shares mutual fund

What is the difference between what is shown on that page and the ETF?

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A mutual fund has several classes of shares that are charged different fees. Some shares are sold through brokers and carry a sales charge (called load) that compensates the broker in lieu of a fee that the broker would charge the client for the service. Vanguard does not have sales charge on its funds and you don't need to go through a broker to buy its shares; you can buy directly from them. Admiral shares of Vanguard funds are charged lower annual expenses than regular shares (yes, all mutual funds charge expenses for fund adninistration that reduce the return that you get, and Vanguard has some of the lowest expense ratios) but Admiral shares are available only for large investments, typically $50K or so. If you have invested in a Vanguard mutual fund, your shares can be set to automatically convert to Admiral shares when the investment reaches the right level.

A mutual fund manager can buy and sell stocks to achieve the objectives of the fund, so what stockes you are invested in as a share holder in a mutual fund will typically be unknown to you on a day-to-day basis. On the other hand, Exchange-traded funds (ETFs) are fixed baskets of stocks, and you can buy shares in the ETF. These shares are bought and sold through a broker (so you pay a transaction fee each time) but expenses are lower since there is no manager to buy and sell stocks: the basket is fixed. Many ETFs follow specific market indexes (e.g. S&P 500). Another difference between ETFs and mutual funds is that you can buy and sell ETFs at any time of the day just as if you could if you held stocks. With mutual funds, any buy and sell requests made during the day are processed at the end of the day and the value of the shares that you buy or sell is determined by the closing price of the stocks held by the mutual fund. With ETFs, you are getting the intra-day price at the time the buy or sell order is executed by your broker.

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    Good answer. I would note that not all ETFs are fixed baskets of particular stocks; there are classes of ETFs that hold bonds, commodities, and various types of derivatives. There are all manner of exotic ETF investments nowadays (such as leveraged or inverse funds). In addition, there are some actively-managed ETFs, where investment managers are still in place (similar to many mutual funds), adjusting the fund's portfolio over time, in contrast to more passive schemes as Dilip described.
    – Jason R
    Commented Mar 18, 2012 at 3:38

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