What are advantages of investing in 'exchange-traded funds' (ETFs)?

Investing in exchange-traded funds (ETFs) offers several significant advantages that make them an appealing choice for many investors. One of the primary benefits is lower expenses. Compared to mutual funds, ETFs generally have lower management fees because they are often passively managed and track an index, which requires less active management.

Another key advantage is diversification. ETFs typically hold a wide array of securities, which can help reduce risk through exposure to various assets within a single investment. This allows investors to gain access to a diversified portfolio without needing to purchase all the underlying securities individually.

Additionally, liquidity is another major benefit of ETFs. They are traded on stock exchanges and can be bought or sold throughout the trading day at market prices, similar to individual stocks. This provides investors with greater flexibility and the ability to respond quickly to market movements.

These characteristics contribute to making ETFs a popular investment vehicle for both individual and institutional investors who seek a cost-effective, diversified, and liquid investment option.