On a more micro level, many ETF investors can sidestep the fund-level capital gains taxes incurred by many investors who own mutual fund shares, experts said.
However, mutual fund managers can also generate capital-gains taxes within a fund itself when they buy and sell securities.
Costs are lowThe first ETF was an index fund: the SPDR S&P 500 ETF Trust (SPY ).
Index funds, also known as passively managed funds, track a market index like the S&P 500 .
Investors have equated ETFs with index funds since their inception, even though there are also index mutual funds, experts said.
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