Both ETFs and mutual funds are managed by fund managers and diversified across many different securities. Many of these funds are designed to track the performance of a major market benchmark or index.

Some mutual funds are actively managed. Mutual funds distribute capital gains even if you haven’t sold any shares. This can create unintended tax consequences. 

You decide when to sell your ETFs and take capital gain distributions. This gives you more control of when taxable events occur. It also allows you to minimize and control the timing of your tax liability.