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5:00ETF vs Mutual Fund: Two Different Machines Under the Hood
Both hold the same basket of stocks. But one trades all day like a share and quietly avoids capital-gains tax, while the other prices once at 4pm and can hand you a tax bill you never asked for. The difference is the plumbing.
An ETF (exchange-traded fund) and a mutual fund (open-end fund) can hold the *identical* portfolio, say the S&P 500. Legally they are both open-end investment companies under the US Investment Company Act of 1940. What differs is the machine that creates and destroys shares, and that single design choice cascades into how you trade them, how they price, and what you pay in tax.
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