ETFs do charge less in management fees than mutual funds. The ETF is not actively managed so there is not a stock picker or manager to pay. This reduces the cost factor of an ETF dramatically. [Advisor ETF Usage Rose 10% Last Year]

ETFs are also more cost effective than single stock investing because it is a one-shot fee, for a basket of shares. With single stocks, every transaction is costly, and the commission fees add up.

Overall, ETFs have become recognized as a tool that can reduce trading costs and improve the overall performance of a portfolio.

Tisha Guerrero contributed to this article.