Index mutual funds differ from exchange traded funds in various ways. Investors need to be aware of the differences in these funds and know which type suits their investing style.
“The investor should understand market dynamics as they affect asset class behavior and be able to understand and justify their decision-making process, not forgetting that trading costs can reduce investment returns,” Mark L. Ross for Investopedia wrote. [What’s Driving the ETF Boom?]
Overall, ETFs are a more sophisticated investing tool that allows investors to trade daily, with the ease of a single stock or buy-and-hold for varied time increments. Institutional investors like ETFs for their tradability and because they can be bought on margin or sold short. [An All-Seasons Model ETF Portfolio]
ETFs also allow investor access to hard to reach areas of the market such as currencies, physical commodities and niche markets. Other investing duties that ETFs can accomplish are tactically allocate asset classes, take directional bets and hedge other investments.