“Market-cap-weighted equity index funds tend to be more tax-efficient than active strategies because they tend to have low turnover,” Rawson added. “ETFs have an additional advantage over mutual funds that stems from their ability to rid themselves of low-cost-basis shares through the in-kind redemption mechanism.” [In-Kind Creations and Redemptions]

Nevertheless, asset class category-specific funds still have a place in some investment portfolios. Investors who prefer overweighting specific market capitalizations can also include small-, mid- and large-cap stock ETFs. For instance, the iShares Russell 2000 ETF (NYSEArca: IWM), iShares Core S&P Mid-Cap ETF (NYSEArca: IJH) and SPDR S&P 500 ETF (NYSEArca: SPY) are the largest small-, mid- and large-cap ETFs, respectively.

For more information on ETFs, visit our ETF 101 category.

Max Chen contributed to this article.