I see there some mutual funds are no-transaction-fees NTF and no-load (or load-waived), the expense ratio of some of them is ~1% just like some ETFs, are both the same or trading (short term investment) of mutual funds always costs more than the ETFs?

2 Answers 2


You don't trade a (non-ETF) mutual fund in the sense that your broker posts (on your behalf) a buy order with a (maximum) price per share that you are willing to pay (bid) or a sell order with a (minimum) price per share that you are willing to accept (ask) and then if there is a complementary order from someone else in the order book that meets your criteria, the deal is struck and there is a transfer of mutual fund shares from one brokerage account to the other brokerage account. What happens instead with mutual funds is that you redeem mutual fund shares by having your brokerage send a redemption order ("sell 500 shares and send me the proceeds", or "sell just enough shares to send me $10,000") and you buy mutual fund shares by having your brokerage transfer money (say $5,000) from your brokerage cash account to the mutual fund and ask the mutual fund to issue you as many shares as the money will buy. You can, of course, bypass the brokerage entirely and set up an account directly with the mutual fund on its website, and hold your shares there. In fact, mutual fund houses (e.g. Vanguard, Fidelity) run hundreds of different funds and you can transfer money between the different mutual funds (or open IRA accounts etc) directly on the fund house's website.

As Michael A's answer points out, the daily price (NAV) of the mutual fund shares is determined once a day, usually after the markets are closed. The fund manager totals up the value of all the assets managed by the fund at the closing price of the stocks and bonds that the fund holds as of the end of the day, plus the money in the "petty cash" account (less the cash accompanying buy orders received since the previous market close), and subtracts off the daily expense fee charged by the fund. The fund manager then divides this amount by the total number of mutual fund shares that the investors are holding to determine the NAV. Then, redemption and buy orders are processed at the NAV just determined. Redemptions are paid out of the petty cash account and shares are issued to buyers at the NAV thus determined. (In case of heavy redemptions, mutual funds allow for redemptions to take as much three days even for ACH transfers into the redeemer's account). Note that buying and selling mutual fund shares is like Forrest Gump eating a box of chocolates; you never know what (price) you are going to get.

As Michael A's answer points out, mutual funds are not intended for short-term trading, and many funds restrict short-term trading via rules such as no more than (say) three buy/sell transactions per quarter or if you buy (sell) a fund, then you cannot sell (buy) the same fund for three months etc. So, if you want to do short-term trading, ETFs are definitely the way to go.

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    You also don't know what price you will get on a market order for an ETF, but there you can instead use a limit order and you don't know if or when it will execute. Oct 10, 2021 at 3:25
  • @dave_thompson_085 Yes indeed, and you have to buy/sell an integer number of ETF shares unless your broker allows for fractional shares of an ETF (not all brokers do). ETFs are generally regarded on this forum as a gift from the gods to poor down-trodden mutual fund investors, but I have never been able to convince myself of their virtues. Oct 10, 2021 at 3:33

Yes, in theory, it may be cheaper to enter into a position in a mutual fund than to enter into a position in a similar ETF, if it's as you describe (no transaction fee and no load for the mutual fund vs. a commission to trade an ETF). A few caveats, though:

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