ETF and Mutual Funds may seem to be the same in nature but there are a few major differences between the two.

* Management – ETFs are passively managed while Mutual Funds are actively managed by professional fund managers who take care of various schemes to give good returns to the investors. While this is not the case for ETF

* Liquidity – In case of liquidity, ETFs are more liquid than Mutual Funds. Some mutual funds have a lock-in period or a penalty in case of early withdrawal.

* Purchase Process – ETFs can be purchased and sold just like stocks. They are directly purchased on actual prices which keeps on changing as per the market fluctuations. On the other hand, Mutual Funds are brought on closing NAV i.e, one gets the ownership of units at the time of market closing.

The ownership in case of an ETF is transferred instantly while in Mutual Funds first a purchase request is generated and then, the units are transferred at the closing rates.

* Tax Benefits – ETFs provide more tax benefits. But, in case of mutual funds also there are tax saving funds which have a lock-in period of 3 years.

When you want to invest for a long term to fulfill your financial goals, mutual funds are preferred to be the best as the investment is actively taken care of by professional fund managers.