ETFs are easy to use, but their internal workings are not. A finely tuned financial system is needed to operate create, trade and redeem them.

What do ETFs bring to investors? Low fees, instant pricing and tax advantages are among the attractions.

This article adresses common misunderstandings and myths about exchange-traded funds.

Popular ETFs include the S&P SPDRs, Barclays iShares and Dow Jones Diamonds.

Some investors appear to believe that the liquidity of an ETF is dependent on the fund's average trading volume. However, this is not the case.

ETFs have tax advantages that can delay paying capital gains.

ETFs help the investor focus on all-important asset allocation.

ETFs options need not be risky. Used in certain circumstances, they actually decrease risk.

Investors who use exchange-traded funds to slice and dice various parts of the U.S. market can choose from benchmarks from Russell, S&P/Barra, and Dow Jones.

ETFs are not the ideal instrument for small, regular investments or trades.

Investors believe options are risky, and rightly so when they are used alone, but they take on a new light when an investor already owns an asset being optioned.