While long-term investors should not day trade their holdings, investors do need to rebalance their portfolios every once in a while, and the trading fees to add up. Since most major broad-index ETFs can be traded commission-free on various brokerage platforms, it may make sense for the average investor to use these ETFs to help keep costs at a minimum.
Additionally, ETFs allow investors to access alternative assets to help diversify a portfolio. For instance, there are a number of passive, index-based ETFs that track real estate investment trusts, commodities and currencies to help provide exposure to assets that have low correlations to traditional stocks and bonds. [Alternative Asset ETFs Diversify Portfolios]
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.