Exchange-traded fundshave grown explosively in recent years, in part because of their usefulness for investors who trade frequently. But ETFs can help you save money even if you follow a buy-and-hold strategy -- and that savings can add up over the years.

ETFs give active traders the ability to buy and sell shares at any time during the trading day. In contrast, investors can only trade shares of traditional mutual funds once daily, at the fund's closing price for the day. Also, many mutual funds have recently begun imposing penalty fees for excessive trading, limiting their investors to just a handful of trades every few months. These fees make ETFs the only viable option for active traders.

Saving money on fund expenses
Buy-and-hold investors, on the other hand, don't benefit from most of the ETF features that active traders like. However, ETFs provide a big cost advantage over many mutual funds. While many actively managed stock mutual funds charge upward of 1% for fund expenses annually, you can find many ETFs that charge 0.25% or less in annual expenses. That may not sound like a lot, but it can means hundreds or even thousands of dollars in your pocket instead of going to your fund company.

Of course, if you use index mutual funds, you've already captured a decent chunk of these savings. Yet you may be able to save even more by switching to index ETFs.

For instance, Vanguard, which is known for its low-cost investment options, has a number of index mutual funds and ETFs that follow exactly the same strategy. Here's a quick rundown:

Below is a comparison of costs for certain funds and their ETF counterparts:

Vanguard Fund Name

Expense Ratio For Mutual Fund

Expense Ratio For ETF Expenses

Total Stock Index

0.18%

0.09%

European Stock Index

0.29%

0.18%

Mid-Cap Value Index

0.30%

0.15%

Small-Cap Growth Index Continued...