Learn about why ETFs have become popular and watch Tim Buckley’s video about them.
All about ETFs

Mutual funds have been the foundation of long-term investing, but ETFs (exchange-traded funds) have gained more popularity in recent years, and for good reason.
What is an ETF?
An ETF is a collection of hundreds or thousands of stocks or bonds in a single fund that trades on major stock exchanges, like the NYSE or the Nasdaq. ETFs are similar to mutual funds in that they’re both professionally managed funds and both trade commission-free online at Vanguard Brokerage (some non-Vanguard mutual funds do have a commission).
What are the benefits of ETFs?
Unlike mutual funds that could require a hefty minimum investment, you can purchase a Vanguard ETF for as little as $1, and you have more control over the order type. If you want to enjoy these benefits while still investing in an index fund, take a look at Vanguard index ETFs.
Branching out isn’t always easy, but adding an ETF (or 2!) can enhance and further diversify your portfolio.

Transcript
Massy: We know there has been a huge adoption of ETFs. Actually, in 2021, north of 900 billion going into ETFs. So we have the question, how does Vanguard view the trend toward ETFs over index funds? I’m going to paraphrase: Are index funds dead? Is it all about ETFs?
Greg: Yes, so sure. I mean there's been tremendous growth when it comes to ETFs. And if you were to look at the size of the ETF assets under management (AUM), since 2015, there was about $2 trillion in AUM in ETFs. That number's more than tripled to over $7 trillion now. So clearly investors are voting that that is a preferred structure, and it's for a variety of reasons.
Number one, I would say is that, look, when you think about the growth of indexing, ETFs just provide a way to get easy access using a single security. And there's some benefits to using ETFs versus traditional funds such as, in many cases, they have lower fees than a traditional index mutual fund.
The other component is really around the tax efficiency. ETFs in general have the ability, because of their creation/redemption process, the ability to defer capital gain activity in many cases. And so that from a tax perspective makes them a bit more efficient as well.
And then in general, you know, investors have received greater access. The fact that you can trade an ETF on many brokerage platforms for free has created a strengthening lever in the ecosystem as well. But again, mutual funds still provide a very vital role. They are critical in terms of the 401(k) plan business. They're also very helpful for our investors when they're thinking about periodic investing and doing that on a more systematic basis.
So again, there's a number of good reasons to have ETFs; but the market is voting, and you're seeing folks really gravitating toward ETFs.