Exchange-traded funds (ETFs) are investment funds that track an index and can be traded throughout market sessions on stock exchanges. They offer flexibility, instant diversification, liquidity, and low costs for individual and institutional investors. Introduced in 1993, ETFs have grown increasingly popular with investors.

ETFs have disadvantages, too. For example, investors might find them to be less diversified in certain sectors and at times illiquid. They can display market-driven price volatility. They could be more expensive compared to owning the actual stock because of the ongoing management fee. In addition, because they’re tradable just like stock, some buy-and-hold investors may be tempted to buy and sell more often that…