Have you been wondering, "What are my HSA investment options?" Well, we've got your answers here.
For informational purposes only
This content is for informational purposes only and isn't investment advice. Consider researching your options or consulting with a financial advisor before choosing an investment type.
ETFs, mutual funds, and stocks
HSA investment rules generally follow the same framework as IRAs, primarily restricting certain prohibited transactions and collectibles, rather than dictating a specific list of allowed investments. On our platform, HSA investing is available through ETFs, mutual funds, and stocks.
Available asset types vary
Some investment types (ETFs, mutual funds, stocks) might be unavailable under your plan. Check the Investments tab to see what's offered.
Exchange-traded funds (ETFs)
ETFs are a basket of stocks designed to track an index or specific sector. They're a flexible investment vehicle that typically offers lower expense ratios than actively managed mutual funds.
Mutual funds
Mutual funds pool multiple investments to create a diversified portfolio of stocks, bonds, or other securities. Managed by professional fund managers, mutual funds let you participate in a broad range of assets without directly managing individual securities.
Stocks
When you purchase a stock, you're purchasing shares of an individual company. Investing in stocks is a high-risk, high-reward strategy that lets you target specific companies.
Comparing ETFs, mutual funds, and stocks
| Exchange-Traded Funds (ETFs) | Mutual Funds | Stocks |
What it is | A basket of stocks designed to track an index or specific sector | A managed portfolio of stocks, bonds, or other securities | Ownership of an individual company |
Example | VOOG, an ETF that invests in stocks in the S&P 500 Growth Index | VFIFX, a diversified portfolio that adjusts asset mix over time for a target retirement date of 2050 | AAPL, an individual stock in Apple, Inc. |
Liquid? | Bought and sold throughout the trading day | Priced and traded at the end of the trading day | Bought and sold throughout the trading day |
Diversified? | Depends on the fund | Yes | No |
Managed? | No | Yes | No |
Characteristics | A flexible investment vehicle, expense ratios are typically lower than actively managed mutual funds | Professionally managed, offers diversification across risk and assets | Direct ownership in a specific company, higher potential volatility |
Here's more on what these terms actually mean when comparing your options.
Diversification
Buying stock in one company can be great if you have strong faith in that company, but it also means putting your eggs in one basket. Mutual funds offer diversification by pooling funds across multiple securities. ETFs, like one tracking the S&P 500, can offer similar diversification, though some ETFs, like one focused on the gold sector, don't.
Liquidity
Mutual funds are priced and traded at the end of each trading day, which limits when you can buy and sell them. ETFs and stocks can be bought and sold throughout the trading day.
Management
Mutual funds are managed by professional fund managers, which likely means a higher expense ratio, but may also offer reassurance that someone skilled is managing them. ETFs and stocks aren't actively managed.
At a Glance
ETFs: track an index or sector, trade throughout the day, diversification depends on the fund, not actively managed, typically lower expense ratios.
Mutual funds: a managed, diversified portfolio, priced and traded once daily at market close, professionally managed.
Stocks: ownership in one company, trade throughout the day, no diversification, not managed, higher risk and reward.