What’s the difference between etf and an investment fund?
Investment fund is a collective term used for many different types of investment vehicles, an ETF is one of them.
An ETF refers to a ‘closed’ fund that is listed on a stock exchange and can be traded like normal stocks and shares can be.
Funds can also not be stock market listed. They are normally referred to as ‘funds’ or ‘mutual funds’.
Shout out to the Freetrade team for this article - https://blog.freetrade.io/whats-an-etf-1fc461b50755
For clarity, an ETF doesn’t have to be ‘closed’, and is not the same thing as a closed-ended fund. See here for a nice summary of differences.
ETFs can issue and redeem shares at will, unlike a CEF.
That’s a pretty good write-up but just to reiterate an ETF is not a closed (or closed-ended) fund - that would be an investment trust.
A closed ended fund starts with a set pot of money to invest and then people can buy and sell shares in the company with the rights to that pot of money. It’s closed ended, because the actual investment pot is closed to new money. (It’s a bit more complex, but that’s basically it).
An ETF has an open-ended structure, which means that the fund can buy more assets as more people invest into the fund.
Also you do not pay stamp duty (0.5%) when buying an ETF.
So as an example 3i infrastructure
Is this a fund?
Thanks both. I genuinely did not know it had to closed. I thought it was limited by the number of shares in issuance. Thanks for clarifying
3in is a closed-ended investment company, or CEF. You can easily tell it’s not an ETF because it doesn’t link to a KID in Freetrade’s app.
You can tell it’s not a mutual or open-ended fund (what people normally mean when they just say “fund”) because Freetrade doesn’t offer those at all, since they aren’t listed on stock exchanges.