ETFs vs Mutual Funds: the battle for efficiency

Choosing between an ETF and a mutual fund is not just about cost: it defines liquidity, transparency, and the type of strategy you can access. At Nautic Invest, we believe the future of the industry lies in independence and in models where the advisor is not just a provider, but becomes a true partner to the client.

How ETFs work and why they are usually more cost-efficient

ETFs (Exchange-Traded Funds) combine the diversification of a fund with the trading flexibility of a stock. Because they trade throughout the day on an exchange, they allow real-time buying and selling. Most ETFs replicate an index and, being passively managed, they carry much lower fees than traditional mutual funds. This cost efficiency has been one of the main drivers of their global growth.

Differences in liquidity, transparency, and costs

  • Liquidity: an ETF can be traded at any time during market hours, while mutual funds only allow redemptions at the end of the day.

  • Transparency: most ETFs publish their holdings daily, giving investors immediate visibility. Mutual funds, in contrast, report with a lag.

  • Costs: passive ETFs usually have total expense ratios (TER) of 0.05%-0.30%, while an active mutual fund can easily exceed 1.5%-2%.

Differential advantages of ETFs versus active mutual funds

ETFs bring together the best of both worlds: the diversification of a fund and the flexibility of a stock. Thanks to their efficient structure, they provide access to global markets at very low costs, with daily transparency of holdings and intraday liquidity that allows portfolios to be adjusted in real time.

Active mutual funds, on the other hand, can be useful in specific niches where an experienced manager adds value. However, the global trend shows that ETFs have become the central tool for building robust, efficient portfolios aligned with investors’ interests.

At Nautic Invest, we believe there is no single universally superior vehicle: what matters is to understand the strengths of each option and combine them strategically according to the client’s profile.