Since ETFs are designed to track the price movements of an underlying, benchmark Index, the investment is considered passively managed, which also helps reduce management costs.
One of the greatest selling points of the ETF product is their low cost. The average expense ratios on most ETFs are lower than the average mutual fund.
While trading an ETF, investors will enjoy the diversification qualities that come with traditional index funds, coupled with the trading options found in individual stocks.
[What is an ETF?–Part 2: Indexing]
Max Chen contributed to this article.