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What are the differences between ETF and Futures?


Ryan
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Hello Ryan,

Both exchange-traded funds and futures offer the investors with several instruments that they can trade. These two financial instruments have many similarities. However, there are major vital differences that separate them.
Futures is an agreement to trade a certain commodity at a given price and a certain future date. Exchange-traded funds, on the other hand, is an investment instrument that trades like stocks. ETF are several securities that track a fundamental index. You sell ETF through brokers on an exchange market.
Both futures and ETF are excellent methods of investing; however, their differences should make you select one that you think is best.
In exchange-traded funds, you have to pay management fees, unlike futures where you do not incur such costs.
According to how long they trade, exchange-traded funds cannot be sold all through the trading day. In futures, however, you can trade for 24 hours each day for six days.
Some ETF typically have a considerable amount of tracking error, unlike futures where the tracking errors are small.
Futures are more capital efficient compared to Exchange-traded funds.
In terms of tax efficiency, the taxes you pay in futures are usually far less than those in ETF.
From this comparison, futures seem to be a better investment option relative to exchange-traded funds.

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