Understanding the Tools in Your Investment Toolbox
Gabelli was founded on the belief that rigorous, bottom-up research can drive superior long-term results. Our Private Market Value (PMV) with a Catalyst™ approach powers our mutual funds and ETFs, aiming to deliver strong performance across market cycles. Through disciplined, research-driven investing, we help pursue attractive risk-adjusted returns for our clients.
While our mutual funds and ETFs offer professionally managed portfolios with liquidity and transparency, understanding the key differences between each can help investors make more informed decisions. Investors should choose an underlying strategy or fund that aligns with their goals and select an investment vehicle that suits their preferences.
|
Mutual Fund |
ETF |
| Trading / Liquidity | – Purchased and redeemed once per day as of NYSE close (4 p.m. EST)
– Short-term trading restrictions and/or costs may apply |
– Trade continuously on an exchange throughout the day
– No short-term trading restrictions |
| Portfolio Transparency | – Active mutual funds typically disclose their portfolios on a quarterly basis, within 60 days of quarter end | – Transparent ETFs publish their full portfolios daily
– Semi-transparent and non-transparent ETFs publish their portfolios on a quarterly basis |
| Pricing | – Priced daily at market close, based on the value of the fund’s underlying holdings
– Bought and sold at Net Asset Value (NAV) |
– NAV is calculated daily at market close; indicative NAV (iNAV) is updated during the trading day to reflect real-time value of portfolio
– Bought and sold at market prices on an exchange throughout the trading day |
| Expense Ratio | – Total expense ratios for mutual funds are usually higher, partly due to shareholder servicing and distribution costs | – Total expense ratios for ETFs are generally lower than those for mutual funds, reflecting lower shareholder servicing and distribution costs |
| Dividends / Distributions | – Income and capital gains distributions may be automatically reinvested (ex-date), unless the investor chooses to receive cash | – Income and capital gains distributions are paid in cash or require a brokerage dividend reinvestment program (may not be reinvested on ex-date) |
| Taxes / Capital Gains | – When shareholders redeem mutual fund shares, the fund may need to sell portfolio securities to pay the redemption in cash, which may result in taxable realized capital gains (or losses) for remaining investors
– Gains (or losses) are also generated from transactions within the portfolio; capital gains or losses are realized when selling fund shares |
– An ETF can satisfy redemptions by delivering to authorized participants (APs) a basket of appreciated securities rather than cash, and utilize §852(b)(6) to dissipate unrealized gains on those positions, reducing the likelihood of having to make capital gains distributions to remaining shareholders
– Gains (or losses) are also generated from transactions within the portfolio; shareholders realize capital gains or losses when selling ETF shares on the exchange |
| Availability | – Financial advisor/intermediary or direct with the fund’s transfer agent
– Often available in 401(k)s |
– Requires a brokerage account
– Generally, not in 401(k)s unless in-plan brokerage services are available |
| Expenses / Costs | – Portfolio transaction costs are shared among all shareholders proportionally
– Redemption fees may apply to individual investors who sell shares within a short holding period – Sales loads or 12b-1 fees may apply depending on share class |
– Transaction costs are mostly borne by the shareholder via bid/ask spreads and brokerage commissions
– No redemption fees, since shareholders transact on an exchange – ETFs do not have sales loads or 12b-1 fees |
Shares of traditional ETFs are bought and sold at market price (not NAV) and are not individually redeemed from the fund. Buying or selling ETF shares may require additional fees such as brokerage commissions, which will reduce returns. These additional risks may be even greater in challenging or uncertain market conditions.
Nontransparent ETFs are different from Traditional ETFs. Unlike traditional ETFs, Non-Transparent ETFs will not tell the public what assets they hold each day. This may create additional risks for your investment. For example:
You may have to pay more money to trade the ETF’s shares. This ETF will provide less information to traders, who tend to charge more for trades when they have less information.
The price you pay to buy ETF shares on an exchange may not match the value of the ETF’s portfolio. The same is true when you sell shares. These price differences may be greater for this ETF compared to other ETFs because it provides less information to traders.
These additional risks may be even greater in bad or uncertain market conditions.
The differences between this ETF and other ETFs may also have advantages. By keeping certain information about the ETF secret, this ETF may face less risk that other traders can predict or copy its investment strategy. This may improve the ETF’s performance. If other traders are able to copy or predict an ETF’s investment strategy, however, this may hurt the ETF’s performance.
Exchange traded Funds (ETFs) are bought and sold through exchanges trading at market price (not NAV) and are not individually redeemed from the fund. Shares may trade at a premium or a discount to their NAV in the secondary market. There is no guarantee the investment strategy will be successful. Investing involves risk including the possible loss of principal.
Premiums or discounts are the differences (expressed as a percentage) between the NAV and market price of an ETF on a given day, generally at the time the NAV is calculated. A premium is the amount an ETF is trading above the reported NAV, expressed as a percentage of the NAV. A discount is the amount an ETF is trading below the reported NAV, expressed as a percentage of the NAV. The prospectus/registration statement shows the frequency of distributions of premiums and discounts for these ETFs for the most recently completed fiscal calendar year and all completed quarters of the current fiscal year.
Investors should carefully consider the investment objectives, risks, charges and expenses of the ETF before investing. The prospectus, which contains more complete information about this and other matters, should be read carefully before investing. To obtain a prospectus, please call 800-GABELLI or visit www.gabelli.com.
Investors should carefully consider the investment objectives, risks, charges and expenses of a Mutual Fund before investing. The prospectus, which contains more complete information about this and other matters, should be read carefully before investing. To obtain a prospectus, please call 800 GABELLI or visit www.gabelli.com
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