Mutual Funds vs. ETFs: Why Choose One When You Can Use Both?

Both mutual funds and exchange-traded funds (ETFs) are designed to give investors great diversification. For example, instead of just investing in a few technology stocks, buying a technology stock mutual fund or ETF would allow you to own dozens or more than 100 technology stocks at the same time so you don't have all of your eggs in just a few technology stocks.

Diversification is one of the best rules an investor can use to protect principal. The downturn of one company's stock doesn't affect your returns nearly as much if you have a diversified mutual fund or ETF.

Active mutual funds perform better in down markets

There is no shortage of arguments in the active-vs.-passive investment management debate, with brilliant minds arguing each side.

found that active U.S. stock funds succeeded nearly twice as often in