What benefit do ETFs offer compared to traditional mutual funds?

ETFs, or Exchange-Traded Funds, provide several advantages over traditional mutual funds, with one of the key benefits being better diversification with lower costs. This is primarily because ETFs often track a specific index or sector, allowing investors to gain exposure to a broad range of assets. As a result, individual investors can diversify their portfolios without needing to purchase each asset separately.

Additionally, ETFs typically have lower management fees compared to mutual funds. This is due to their passive management structure, where they follow an index rather than relying on active management by fund managers. This cost efficiency, combined with the diversification benefits, makes ETFs an attractive investment vehicle for many investors.

The other options highlight aspects that do not align with the advantages of ETFs. Higher management fees and inflexibility in investment choices do not characterize ETFs, as they generally have lower fees and allow easier trading since they can be bought and sold throughout the trading day like stocks. Similarly, ETFs actually provide greater transparency regarding their holdings since they are required to disclose their portfolio daily, unlike many traditional mutual funds that disclose on a less frequent basis.