This is a question for most of the people who invest which is better an ETF or an MF. When we talk about MF or Mutual Funds we have two types of it, active funds and passive funds (index funds). Someone manages an Active fund and has a higher expense ratio whereas a passive fund is investing in the pure index and thus its expense ratio is quite less.
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When we talk about wealth creation, it's not a 3-year or 5-year time, it's for a long duration like 10 to 15 years or even more. So that means we have to be very careful when selecting whatever product we want. MF is one of the widely used products by many to create wealth, you just have to start an SIP and thus you will see the compounding effect come into effect and you will see great returns in the future.
Both ETF (Exchange Traded Funds) and MF (Mutual Funds) are great for long-term investment. But what we have to find out the fees or the redemption problem if any. One problem I see with MF is that sometimes you don't get the advantage of market volatility whereas with ETF you get that advantage. For example, when the market went down by 6% on 4th June, many people who invested in MF that day did not get the same day NAV (Net Asset Value) whereas whoever invested in the ETF they have got the ETF at a lesser price.
When it comes to taxes, Index Funds and ETFs have almost similar taxes if kept for the long term. For ETF, you have to have the Demat account but for MF it is not required. When coming to redemption, there might be a problem with ETF if your amount is large because you will not find the buyer but that is not the case with MF. You can sell the whole amount and get the money in 2 days. But again ETF is much more liquid, which means if you sell today you will get 80% of the money on the same day and the remaining 20% the next day.
