Exchange-traded funds (ETFs) have become one of the most flexible and accessible investment options available today. They blend the diversification of mutual funds with the convenience of stock trading. At New York Life Investments, we see ETFs as powerful tools to help investors construct portfolios that are efficient, transparent, and aligned with long-term goals.
ETFs trade throughout the day on major exchanges, giving investors the ability to react to market conditions in real time. Unlike mutual funds, which are priced only once per day, ETFs allow for more precise control over buying and selling decisions.
Transparency is another defining feature. Most ETFs disclose their holdings daily, offering clarity into what investors actually own. This visibility can enhance portfolio oversight and help manage risk more effectively.
ETFs also stand out for their cost efficiency. With lower expense ratios and generally reduced trading turnover, they can offer meaningful long-term savings compared to other investment vehicles.
Finally, ETFs are diverse. Investors can choose from broad market funds, sector-specific strategies, or thematic approaches such as technology innovation, sustainability, or income generation.
Clearing Up Common Misunderstandings
ETFs continue to grow in popularity, but a few common misunderstandings still exist. Clarifying these points can help investors better understand how ETFs function and how to use them effectively.
- ETFs are not inherently riskier than mutual funds. Both carry risk based on their underlying holdings.
- ETFs are not limited to passive strategies. Many are actively managed by professional portfolio managers.
- ETFs are not only short-term trading tools. Their transparency and cost efficiency make them effective long-term core holdings.
- Low volume doesn’t mean low liquidity. Liquidity is driven by the underlying holdings.
- Last traded price vs. true value. Investors should also consider real-time bid/ask quotes or the ETF’s indicative NAV (iNAV) to assess fair value.
At New York Life Investments, we aim to help investors look beyond surface-level assumptions and understand how ETFs operate so they can make confident, informed decisions.
All investing involves risk, including possible loss of principal.
This material contains general information only and does not take into account an individual’s financial circumstances; is intended to be educational and informative in nature; is subject to change; and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or as a primary basis for an investment decision. Rather, an assessment should be made as to whether the information is appropriate in individual circumstances and consideration should be given to talking to a financial professional before making an investment decision. The information discussed is strictly for educational purposes and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.
