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ETFs marry concepts from index funds and individual stocks. They offer the diversification benefits of mutual funds while allowing investors to trade throughout the day on stock exchanges. This flexibility enables investors to react quickly to market movements.
Most ETFs have lower expense ratios than actively managed mutual funds, typically ranging from 0.03% to 0.75%. Many ETFs are designed to replicate specific market indexes, similar to index funds. Their availability on commission-free platforms also enhances accessibility for everyday investors.
Conclusion
For many everyday investors, index funds and ETFs are the preferred choices. Their low fees, ease of understanding, and diversification make them suitable for long-term investment strategies.