Why use exchange-traded funds?
Exchange-traded funds (ETFs) aim to match the performance of a benchmark index. This strategy requires less frequent turnover of holdings within the fund which means fund fees tend to be significantly lower than actively managed funds. When low-cost funds post solid performance, investors keep more of what they earn.
ETFs tend to be more tax-efficient than actively managed funds. When you sell your mutual fund or ETF at a gain, you will have to pay taxes on that gain. But capital gains taxes can be incurred even if you don’t sell your shares, due to trading activity within your fund. Actively managed funds that frequently buy and sell securities are often subject to higher capital gains taxes. Because most ETFs track an index, they tend to be more tax-efficient. Exchange-traded funds allow us to construct portfolios that are globally diversified, flexible and highly liquid.