“Indices have outperformed a majority of active managers in nearly all major domestic and international equity categories,” according to a Standard & Poor’s mid-2011 survey. “In addition, five-year asset-weighted averages suggest that active managers have fallen behind benchmarks in 11 out of 18 domestic fund categories.”

Furthermore, with ETFs, anyone can monitor the funds’ holdings and market exposure on a daily basis, whereas mutual funds typically disclose holdings quarterly or semi-annually. ETFs also allow investors to access a greater variety of asset classes, like commodities or international equities.

For more information on ETFs in 401(k)s, visit our 401(k) category.

Max Chen contributed to this article.