Furthermore, institutional investors that use leverage, take directional bets and hedge investments benefit from ETFs because of their lower expense ratio and ability to trade quickly, at any time of day. [ETFs Taking Market Share From Index Funds]
For those investors who are dollar-cost averaging, trading ETFs can be expensive because of the brokerage fees. A buy-and-hold ETF investment can serve as a less expensive way to invest long term, but this does expose investors to tracking error.
The above situations are just a few of the factors that go into the decision-making process. There are numerous choices to make, and plenty of options, but by targeting what asset class you’d like exposure to, a lot of the guesswork is taken out.
Tisha Guerrero contributed to this article.