1) What they have in common
Index mutual funds and ETFs pursue the same goal: track an index (e.g., MSCI World or the S&P 500) with low fees and lots of diversification.
- You take the same market risk (if the index falls, you fall).
- The difference in results typically comes from costs and behavior (contributing & holding vs tinkering too much).
For a long-term plan, habit matters more than the perfect product: contribute consistently and don’t panic.
2) Practical differences (the ones you’ll actually feel)
- Buying/selling: a mutual fund is subscribed at NAV (typically once per day). An ETF trades like a stock, with real-time pricing.
- “Hidden” costs: with ETFs you may pay spread + broker commission. With funds, costs are usually more “all-in”.
- Small, frequent contributions: if you invest €50–€200/month, a fund is often more convenient. With ETFs, per-trade fees can matter (depending on the broker).
- Order types: with ETFs you can place limit/stop orders; with funds, you typically can’t.
3) Taxes in Spain: the difference that can change the decision
In Spain, mutual funds often allow switching from one fund to another without paying tax until the final redemption (tax deferral). ETFs, on the other hand, are typically taxed when you sell (like shares).
If you think you’ll adjust your portfolio over time, tax-deferred switching gives you a lot of flexibility. If your plan is truly buy-and-hold for many years, the tax difference matters less… but it still exists.
*Note: there are specific cases and products with nuances. If you want, we can review it with your platform and your situation.*
4) How to choose in 5 questions (with a shortcut)
- Do I want to switch without triggering taxes? (if yes, a fund often wins in Spain)
- Do I care about intraday execution / limit orders? (if yes, an ETF often wins)
- What is my true total cost (TER + broker + spread)?
- Will I make small, frequent contributions?
- Which option makes it easier for me to not touch it when markets get ugly?
If you want an “easy-to-maintain” plan with automatic contributions, go with a fund. If you’re already comfortable with a broker and want stock-like execution, go with an ETF.
5) Mini plan to get started (without overthinking)
- 1) Choose your base index: a global index (more diversified) is often a solid first building block.
- 2) Choose the wrapper: fund or ETF based on your answers above.
- 3) Automate: a fixed monthly contribution (even if small).
- 4) Anti-noise rule: review once a month (or even less).
If you want quick calculations, message me and I’ll help you run them.
6) Common mistakes (and how to avoid them)
- Obsessing over TER and forgetting spreads/execution (for ETFs).
- Choosing by hype without a contribution plan and clear rules.
- Switching products every 3 months: the big cost is usually behavior, not the product.
