ETFs, defined: Even Wall Street has its fashion trends, and right now exchange-traded funds are still enjoying hot-commodity status. They are built like index mutual funds, but they can be traded like stocks.
These days, you can find an ETF that tracks or mirrors almost every major and minor market sector—from small-cap companies to long-term bonds.
Stuff we like. ETFs are extremely cheap; their expense ratios are among the lowest in the business. And right now many companies are offering ETFs at no commission.
If you’re a short-term investor, buying ETFs lets you trade in and out of broad market sectors—say, biotechnology or Ukrainian folk art. (Kidding.)
If you’re a long-term investor, creating a portfolio of index funds is a classic, low-cost buy-and-hold strategy; you can reduce costs further by using ETFs.
Stuff we don’t. Trendiness has its downside—and with a lot of players entering the ETF market, some funds may not be strong enough to survive, so vet your options carefully.