Summary of Exchange-Traded Funds

ETFs have a lot to offer. They’re flexible and low-cost, and their underlying portfolios are protected from the impact of investor trading, which should make them more tax-efficient than many mutual funds.

Nevertheless, look carefully before you leap. ETFs’ cost advantages aren’t always as large as they might seem, and trading costs can quickly add up. Particularly if you’re in the market for a fund that tracks a broad index such as the S&P 500, or if you wish to invest regular sums of money, the case for choosing an ETF over one of the existing low-cost mutual fund options isn’t clear-cut.