By owning an ETF, investors get the diversification of an index fund as well as the ability to sell short, buy on margin and purchase as little as one share (there are no minimum deposit requirements). Another advantage is that the expense ratios for most ETFs are lower than those of the average mutual fund. Expense ratio is the cost that a company charges you to manage and market the etf when you are an investor in that ETF. Believe me, they can add up. When buying and selling ETFs, you have to pay the same commission to your broker that you'd pay on any regular stock order. So if you pay a commission for each trade it would be the same that you would pay for a stock trade.

There exists potential for favorable taxation on cash flows generated by the ETF, since capital gains from sales inside the fund are not passed through to shareholders as they commonly are with mutual funds.

On average, the costs of ownerships of ETF’s are ⅓ of what a mutual fund costs to own. Mutual funds charge about 1.5% per year management fee whereas most etf’s charge half a percent annual management fee. Doesn't sound like a lot, but wait until you have $1 million in an account and the expense is 2% vs. 1% for the same instrument. You would be saving $10,000 a year just be investing in the ETF with the lower management fee.

So many companies offer ETF’s just like so many companies offer mutual funds.

The really cool thing about ETF’s is that we can use them for global investing, sector investing, and we can use leveraged ETF’s without having to use our own margin. There are 1x, 2x and even 3x ETF’s that give you 3 times the return or loss of the underlying fund which is like getting a 3x leveraged account without having to pay for the leverage personally in your own account.

There are literally trillions of dollars invested in ETF’s around the world. I think just under 3 trillion dollars is the number now. What a great product for mutual fund companies to market. All they are doing is creating tracking vehicles ETF's and providing investors with passive investment vehicles at a low price. For a trader, a swing trader, or a long term trader these investment products are great. You’ll see why as we go along but they offer diversification, leverage, and liquidity because they trade in real time just like a stock.

Other advantages:  You don’t have to wait until the market’s close to buy ETF shares or meet an investment minimum (as much as $10,000 and up), as you would with a mutual fund. ETFs can be traded throughout the day, and you can buy as little as one share of an ETF.

What about disadvantages: Yes. Investor demand for ETFs doesn’t always match supply. When that occurs, the difference between the buy and sell prices—known as the bid-ask spread—widens. Lightly traded ETFs, which typically focus on obscure investments, are prone to big spreads. For example, PowerShares S&P SmallCap Health Care (PSCH), an ETF that buys small health care stocks, recently had an average spread of 33 cents per share, according to ETF.com. In contrast, the spread for the widely held SPDR S&P 500 (SPY) was only a penny.

Similarly, supply-demand dynamics can affect whether ETF shares sell above or below the value of the fund’s underlying assets. Certain mechanisms are designed to prevent ETFs from selling at noticeable premiums or discounts to net asset value (NAV), but things can get out of whack when a fund focuses on a niche market. Take PowerShares Japan Currency Hedged Low Volatility Portfolio (FXJP), which owns shares in relatively stable Japanese stocks and hedges the foreign-currency risk. Throughout 2016, its shares traded at an average discount of -6.2% below NAV and for as much as 2.2% above NAV. By contrast, shares of SPDR S&P 500 never traded for more than 0.1% above or below NAV.