Transparency of holdings is another favorable characteristic of ETFs. The transparency is also available in real time, not just at the close of a trading day. The daily transparency that an ETF has can help investors with asset allocation and avoid over or under exposure to a certain stock or sector. [Sector Investing with ETFs]
Diversification is another area that an ETF satisfies. The ability to give an investor a well-rounded basket of stocks tracking a sector or country is just one example. Other areas that ETF diversification can assist with is portfolio construction, proper asset allocation and risk mitigation. By investing in a basket of numerous companies, if one stock does not do so well, the downside is eased because there is less exposure to the failing company.
The benefits of ETFs extend beyond this list, and most investors will not realize them until they have invested in them. While low cost is a huge advantage of using ETFs, it is certainly not the only one. [Schwab Takes the Lead in ETF Price War]
Tisha Guerrero contributed to this article.
