Mutual funds can be great -- especially the index fund variety. They are professionally managed and generally hold a variety of securities, and once you plunk your money into them, it's quickly diversified. But many mutual funds charge fees that are higher than necessary, and many have minimum investment amounts, that can be $3,000 or more.

Enter exchange-traded funds (ETFs), which are essentially funds that trade like stocks, meaning that you can buy as little as a single share at a time. And the best index ETFs charge minuscule fees as well.

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Source Fool.com