Why Use Exchange Traded Funds?

ETFs have become popular investment vehicles for investors seeking low-cost, convenient exposure to the capital markets. Annual ETF expenses can be as low as .09% of assets whereas the average mutual fund fee is over 1%. ETFs do not charge front or back end loads either. Due to the tax structure of an ETF, investors are typically exposed to fewer taxable capital gains when compared to a mutual fund. ETF investors also have complete transparency in the underlying holdings.

ETFs are suitable to both buy and hold investment strategies and active investment strategies. Buy and hold investors receive the benefits of low cost and tax efficiency noted above. ETFs can also be margined and options on ETFs provide opportunities to implement defensive and more speculative investment strateiges.

Further reading: What are ETFs?