What Are the Benefits of ETF Investing?

A large part of that can be attributed to a number of different benefits that ETFs can provide, several of which include liquidity. ETFs tend to trade intraday on an exchange, similar to a stock, and so you can buy and sell an ETF throughout the trading day. ETFs also have more than one layer of liquidity in what’s known as primary and secondary market liquidity, where in addition to the liquidity that’s taking place between a buyer and seller on an exchange, ETFs can also tap into the liquidity between an ETF provider as well as a market maker. Another benefit is diversification. Because ETFs invest in a group of securities that can span across various asset classes, geographies, and/or sectors, investors of an ETF can get diversified exposure via a single investment vehicle. Third is transparency. Many ETFs tend to publish their holdings information, which gives investors a good idea of the overall portfolio composition of the fund, and so that they know exactly what they’re investing in and to what degree. Then lastly is lower cost. Many ETFs, especially passive index-tracking ETFs, tend to have lower overall fees, and so, as a result, those cost savings are then passed on to investors who get to keep more of their returns at the end of the day.

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