Unlike open-end mutual funds that can only be redeemed at the end of the day, ETFs are priced throughout the day and can be bought or sold just like a stock. Instantly get exposure to a portfolio of stocks of your choice. You can choose a fund that either represents a broad-based market index, a specific industry sector or an international sector. No sales loads, although brokerage commissions will apply. No high management and sponsor fees.
Expense ratios are very similar between ETFs and open-end mutual funds.
Both ETFs and open-end mutual funds provide low stock turnover, which in itself is tax efficient because capital gains are not realized. However, ETFs provide a tax advantage not available with mutual funds. Mutual funds sell securities to cover redemptions creating capital gains. ETFs transfer securities out to redeeming shareholders instead of selling the securities thus minimizing taxable capital gains. Proper investment diversification is intended to reduce the risk inherent in particular securities.