What are the benefits of using ETFs?
Essentially, with ETFs, you enjoy both the flexibility of a stock and the diversification of an index fund. While most mutual funds are priced at their net asset value (NAV) at 4:00 p.m. daily, the price of the ETF changes in real time throughout the day. ETFs can also be bought on margin (money borrowed from your broker) and sold short. Unlike regular stocks, ETFs can also be sold short on a downtick (in a market that is moving down). In addition to having both the benefits of flexibility and diversity, the expense ratios for most ETFs are extremely low. Also, since the underlying components of an ETF basket remain constant, the fund is not forced to sell stocks when investors sell their shares. Often, when traditional mutual fund investors sell all or part of their investment, all of the investors in that fund suffer capital gains tax consequences. While ETF investors may suffer capital gains costs as the result of dividend payouts or index rebalancing, they do not suffer these conse
