An ETF trades more like a stock. The price changes per second and when you buy it, the trade executes immediately so you know exactly what price you are buying it at. This allows more flexibility in trading and allows you to buy as little as one share. Many brokerage firms even allow you to buy a fraction of a stock now, while a mutual fund may have a minimum investment amount. This flexibility could make it easier for you to save and invest if you don’t have much to start.
Risk versus reward
If you buy an ETF like SPDR S&P 500, you are 100% invested in stocks. This higher level of risk should translate into a higher average rate of return and greater growth in good stock market years. But in return for that, you could also incur larger losses during a stock market crash or bear market.
In a year like 2008, you would have lost 37% of your wealth if you only owned SPY, and if seeing your accounts go from $ 100,000 to $ 63,000 makes you nervous, investing only in that ETF may not be right for you. But you can also buy bond fund ETFs and add something like Vanguard Total Bond Market ETF could help limit losses. But you will also reduce your average rate of return and your potential to return in good years.