Why ETFs Are So Popular (And Why You Should Use Them)

Exchange-traded funds have skyrocketed in popularity in recent years, as more investors have used them as a centerpiece of their investing. But are ETFs right for you?

In the following segment from their video guide to investment planning, Motley Fool director of investment planning Dan Caplinger talks with Fool markets/IP bureau chief Mike Klesta about how ETFs have taken over the investing world and whether they make sense for most investors to use. Dan notes that many are drawn to the freedom that ETFs offer over mutual funds, with the ability to react to up-to-the-minute market moves rather than waiting for once-daily trading opportunities of traditional mutual funds. Yet the true advantage Dan cites is the low cost involved with ETFs, especially with many brokers offering ETFs from BlackRock (NYSE: BLK  ) , State Street (NYSE: STT  ) , Vanguard, WisdomTree (NASDAQ: WETF  ) , and other ETF-manager partners at no commission. Dan concludes that even though many investors misuse ETFs to trade more frequently than they should, ETFs are here to stay, and used correctly, they can enhance your investment returns.

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