mutual funds vs etf

woo hoo! I did it! I managed to save $1,500 in our emergency fund. However, after listening to episode 66 of the ChooseFI podcast and reading Big ERN’s post on the idea of NOT having an emergency fund while he is still actively working, I changed my mind on what I was going to do with it. I still think an emergency fund with funds that are easily accessible is important, especially since we are still living paycheque to paycheque. So I’m leaving $500 in my Allybank savings account and I opened a Schwab brokerage account with the $1,000.

However, I’m still pondering what I should do with the $1,000 in the brokerage account. Specifically, should I invest it in a passive index fund OR get the ETF. According to Schwab:

Both ETFs and index mutual funds are more tax efficient than actively managed funds. And, in general, ETFs can be even more tax efficient than index funds.

And since my brokerage account is a taxable account, it would make more sense for it to be ETF. But since I’m hoping to be able to make regular contributions, I wonder if it might be better for it to be in a mutual fund so that when I need to get quick access to a portion of it, I can get whatever dollar amount is needed instead of having to sell off a whole share (I’m really not sure how to describe it), plus, there would be less cash drag.

And honestly, for such a small amount, would it really  matter whether or not its in an ETF or a passive index fund?


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