Passive ETFs have lower expense ratios because they don't require a team of portfolio managers to constantly analyze and adjust the mix of underlying investments. Over time, this lower cost can add a meaningful amount to the value of an investor's holdings.

While advisors and investors appreciate lower expense ratios, ETF's benefits extend beyond a simple fee advantage. A closer look reveals another hidden strength: real-time trading.

Unlike traditional mutual funds, which price investments only at day's end, ETFs operate like stocks, providing continuous price transparency and allowing for immediate execution. Gone are the days of uncertainty surrounding redemption values; with ETFs, you see the precise price you'll pay and receive, empowering informed decisions throughout the trading day.

Yet another impactful advantage lies in their liquidity. Popular ETFs often boast trading volumes exceeding even blue-chip stocks. This translates to tight bid-ask spreads, minimizing the price difference between buying and selling, and enabling efficient trade execution.

The combination of low-cost, real-time pricing, and ample liquidity make ETFs powerful tools for financial advisors seeking precision and flexibility within their client's portfolios.

Finsum: Low cost is not the only reason financial advisors should consider ETFs in their client’s portfolios. Consider these other advantages as well.