The following are several of the many advantages of ETFs:

Through November, 2009 there was a net inflow of $32B in ETFs. Among their advantages are the following:

1. Lower costs: The majority of ETFs have zero fees. If they have any fee at all it will have much lower distribution, marketing and accounting fees than other investment products. They are generally not actively managed and are insulated from required costs of buying and selling securities to accommodate purchases and redemptions. They generally have lower costs than other investment products.

3. Tax efficiency- Generally ETFs have lower turnover of their portfolio securities, which help to have lower capital gains taxes. The power to not have to sell securities to meet investor redemptions also increase their tax efficiency. They are also known for having more aggressive tax advantages than other financial investment products.

4. Market exposure and diversification- Index ETFs inherently provide diversity across and index. In fact, they bring exposure from a large variety of markets including broad-based indexes, broad-based international and country-specific indexes, industry sector-specific indexes, bond indexes, and commodities. ETFs are a common sense choice to keep portfolio allocations balanced, and to “equitize” cash for quick investment.

5. Transparency- There is little doubt that transparency is one of their greatest benefits. Whether it is index funds or actively managed, ETFs are priced at frequent intervals throughout the day. Traditional investment products typically do not allow the same degree of transparency.

Exchange Traded Funds (ETFs) many advantages skyrocketed their popularity very quickly. By the end of November, 2009, net inflows were at $32B. They continue to be among the great investment methods.

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