You opened a securities account because you were “worried about the future” and bought something via NISA. But to be honest—
“What is the difference between a mutual fund and an ETF?”
“How much am I actually being charged for the trust fee?”
“I don’t really get what they mean by exchange rate risk.”
“I bought something that seemed popular, but is this actually right for me…?”
In fact, many people feel this way. Even though you managed to open a securities account, you hit a wall of technical jargon and have continued investing without really knowing what you’re doing, too embarrassed to ask.
Over the next five installments, we will turn that “I’m not really sure” into “I see, this is fine.” I will explain technical terms using familiar analogies as much as possible, so please read on with peace of mind.
## First, the most important premise: Mutual funds and ETFs are the “same family”
I’ll start with something that might surprise you.
**Mutual funds and ETFs are actually the same family at their core.**
Both are financial products where **money is collected from many people, and professionals (investment management companies) use that money to buy and manage stocks, bonds, and other assets in bulk.** Think of it as a **”variety pack containing various ingredients.”**
By buying just one product, you can diversify your investment across hundreds or thousands of companies—this is the greatest strength shared by mutual funds and ETFs.
## So, what is the difference?
If they are the “same family,” why are they called by different names? The answer is simple.
**An ETF (Exchange Traded Fund) is a mutual fund that is “listed” on a stock exchange. Other mutual funds that are not listed are generally called “mutual funds.”**
“Being listed” means that **it is traded on a stock exchange just like a stock.** If you want an analogy, it might be easy to think of it this way: a mutual fund is like “mail-order shopping where you look at a catalog to place an order,” while an ETF is like “going to a store and buying something on the spot while looking at the price tag.”
## How does this difference affect real life?
The difference of “whether or not it is listed” goes beyond just the mechanism. This difference changes the following:
– **When the price is determined** (once a day, or in real-time)
– **How much you can buy from** (from 100 yen, or is a larger amount required?)
– **Types of costs incurred** (only trust fees, or are trading commissions also required?)
Some of you may not actually know whether the product you bought “without really knowing” is a mutual fund or an ETF. But that’s okay. From the next installment, we will look at each one carefully.
## What I want to convey in this series
Over the next four installments, I will deliver the following content:
– **Part 2**: Differences in how prices are determined. Why don’t I know the price even though I placed an order?
– **Part 3**: The true nature of costs. How to check trust fees and commissions right now.
– **Part 4**: What is exchange rate risk? The difference between yen-denominated and foreign currency-denominated.
– **Part 5**: Which one is actually right for me? A checklist to review your current investments.
Once you understand the meaning of each word, you will be able to make decisions based on your own will, whether it’s “this is fine” or “I should review this,” regarding the investments you had previously left to “I’m not really sure.”
Next time, I will unravel the mystery of “how prices are determined,” which is where many people stumble at first, using familiar examples.
→ Continued in Part 2
For reference, you can read it for free on Kindle Unlimited ↓↓↓