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Special Report

Morningstar's Guide to ETFs

Here’s what you need to know about these popular funds that trade like stocks.

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The first exchange-traded fund, SPDR S&P 500 (SPY), made its debut in 1993. Today, more than $4 trillion in assets rests in these vehicles.

Their popularity is understandable. ETFs are easy to buy and sell--and given the fee wars in the industry, they’ve become virtually free to buy and sell. They have a reputation for being tax-efficient (somewhat true) and low-cost (not always true). And because many of the most popular ETFs track widely followed and transparent indexes, there’s no mystery behind their performance: It’s usually the performance of the index minus fees. Lastly, there’s no key-person risk: If the manager leaves, another can step in without much ado.

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Susan Dziubinski does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.