ETF features for investors

• ETFs make investing simple and accessible—they can provide diversification across stocks, bonds, and other assets in a single trade.
• Lower costs¹ give ETFs an edge over some investment options, helping investors potentially grow wealth.
• Its structural targeting of flexible trading and transparency can help investors buy, sell, and monitor holdings—an advantage in both stable and volatile markets.

Exchange traded funds (ETFs), often described as a basket of securities that can be bought and sold in a single trade on a stock exchange, make investing simpler.

Rather than buying and managing individual securities, investors can gain diversified exposure to markets, sectors, asset classes, or investment themes through a single ETF. ETFs provide a range of ways to access investment exposures—without you needing to select each underlying security individually.

Since ETFs first emerged in the 1990s, their usage has grown significantly. Today, investors are unleashing the power of ETFs to grow their money—and meet their investment objectives.  

6 key benefits of ETFs

ETFs are a popular tool for today’s investors for one essential reason: they make investing easier for you. They offer a simple and efficient way to build a portfolio the way you want, based on your objective. Their effectiveness stems from a range of benefits, which can help investors save money on costs and diversify with broad or targeted exposures.

From diversification to cost efficiency and transparency to trading flexibility, let’s dive into six benefits that are attracting investors around the globe to these investment vehicles.

1. Portfolio diversification

Why it matters: Diversification gives you the potential to reduce concentration risks.

ETFs offer one of the easiest ways to diversify a portfolio by providing you with building blocks across a range of asset classes. Some ETFs track the performance of benchmark indexes that track a long list of individual securities. Others focus on specific sectors, like Technology or Health Care, or even invest across different regions around the world.

You can use ETFs to potentially add diversification that spreads across asset classes, geographies, and sectors. Instead of predicting individual winners or losers by investing in single stocks, ETF diversification helps you capture market growth and potentially higher returns in multiple investment opportunities.

2. A wide variety of investment choices

Why it matters: With extensive ETF options available, you can access nearly every market segment—including niche market opportunities.

As the use of ETFs has increased over time, the range of available market exposures has expanded. In fact, there are more than 14,000 ETFs available globally.⁵ That means you can use ETFs to meet your investment objectives by conveniently accessing both broad and targeted exposures, including a variety of:

• Asset classes: Equities, fixed income, commodities, currencies, alternatives, multi-asset
• Geographies: Global, regional, developed markets, emerging markets, single country
• Sectors or industries: Equity exposures such as biotech, insurance, transportation, fixed income exposures such as high yield, bank loan, aggregate
• Long-term investment themes: Multi-generational themes such as sustainability or technological advances
• Focused investing styles: Dividend, growth, momentum, size, value, volatility

3. Lower costs

Why it matters: ETFs’ low costs could help you save money over time and potentially help you reach your goals faster.

Passively managed ETFs typically have lower management fees and operating expenses than mutual funds. Fund-level transaction costs occur relatively less frequently due to the low turnover of most ETFs. When fees and expenses are low, you have the potential to keep more of your returns.

How much lower are ETF costs? Both ETFs and mutual funds have an expense ratio, which includes management fees and the fund’s total annual operating expenses. The median expense ratio for index ETFs is lower than that of index mutual funds.⁶

4. Trading flexibility

Why it matters: ETF liquidity allows you to get in and out of markets quickly, which can be especially helpful in volatile markets.

In times of market volatility, the ability to trade matters. Investors want to be able to buy and sell securities quickly, easily, and at an attractive cost. During more severe bouts of volatility, the market for individual securities sometimes becomes harder to trade, whereas, on a relative basis, the ETFs that hold those same securities could continue to trade throughout the day.

That ease of trading—or liquidity—is one of the defining features of ETFs. Think of it like concert tickets. Some tickets are in constant demand and can be resold quickly at transparent prices—similar to many widely traded ETFs. Others may take longer to sell and require more effort to find a buyer. ETFs help you stay closer to that first scenario, offering the ability to act when it matters most.

5. Transparency

Why it matters: ETF holdings are available daily, so you can know exactly what you own.

The holdings of many ETFs are fully transparent and made available daily. This disclosure means you know what your ETFs own in real time, allowing you to make more informed investment decisions with greater accuracy.

This is important because sometimes mutual funds may seem different on the surface, but have overlapping holdings, which can heighten risk to your portfolio.

6. Trades throughout the day

Why it matters: Because ETFs trade throughout the day, investors can place trades during market hours, subject to liquidity and execution conditions.

At any time during the trading day, ETF shares can be bought and sold through brokerage accounts at their current market prices, which may be slightly more or less than their net asset values (NAV). There are no minimum holding periods.

When trading ETFs, you can employ a wide range of techniques to react to market movements, shift allocations, and deploy investment strategies, such as buying on margin, short selling, and placing limit orders.

ETFs trade throughout trading hours, which offers them structural benefits when compared with mutual fund shares, which are priced only once at the end of the trading day. Mutual fund shareholders purchase and redeem shares at the fund’s closing NAV.

Frequently asked questions