Unlike traditional funds, ETF shares trade on an exchange and are priced throughout the trading day. The process by which ETF shares are created and redeemed is also different, giving it tax advantages over traditional funds. Also, until 2008, all ETFs in the U.S. tracked indices (i.e., were not actively managed) and were typically low cost. This combination of tradability, tax efficiency, and low-cost index exposure drove the adoption of ETFs, and they took significant market share from traditional mutual funds.
ETF & Mutual Fund, Research