Convenience: You can buy and sell ETF shares on exchanges by looking at the market prices available on the trading portal. ETFs are listed on exchanges that are well regulated. This has contributed to transparency in trading ETFs. Also, investors who are unsure of which investment product to choose can invest in Index ETFs, which will provide them exposure to the market.
Lower Transaction Charges: ETFs can be traded at much lower cost that what you would incur on other index tracking products. Investors who are unsure of which stock to invest in can invest in a sector-based ETF and benefit from the sectoral growth by investing a small amount of capital.
Tax Benefits: Dividends from ETF schemes are tax exempt for investors. If an investor sells ETFs units before 12 months, he is liable to pay short term capital gain tax at the rate of 10 percent. At the time of redemption the investor need not pay tax. They are also exempt from wealth tax. However, the time of redemption investors would need to pay securities transaction tax (STT) at 0.25 percent on the value of redemption.
Arbitrage Opportunities: ETFs, being index tracking products, can be used to generate profits out of price differences between ETFs and other index products like futures etc.