Performance. ETFs address the problem of benchmark underperformance by actively managed mutual funds.  The empirical evidence has shown that the majority of active fund managers fail to outperform their benchmark indexes, due principally to the various costs (e.g. compensation, marketing, trading) of their activities.  The minority of actively managed funds that do outperform their benchmarks is not a static group.  So while it is possible to identify outperforming funds in hindsight, the difficulty lies in identifying such funds in advance.    

Diversification. ETFs allow investors to gain exposure to an entire asset class with a single security, thereby avoiding the risks of owning individual stocks. ETFs own most or all of the securities that constitute an index, and exact portfolio holdings are disclosed on a daily basis, providing full transparency. Using exchange traded funds, AgileInvesting constructs institutional-caliber portfolios that are both highly streamlined, with respect to the number of portfolio componenets, and broadly diversified, given the large number of securities underlying individual ETFs.

Tax Efficiency. Tax efficiency is a critical issue that is often overlooked by investors.  Delaying the taxation of appreciating assets  significantly enhances after-tax returns over time. ETFs are among the most tax-efficient securities due to their low internal porfolio turnover and their unique method of creating and redeeming shares, which allows the ETF manager to continuously purge the lowest-basis tax lots from the portfolio.  As a result of these factors, ETFs are able to minimize, and in most cases avoid altogether, the taxable gain distributions that have created unwanted tax liabilities for investors in actively-managed mutual funds.