Exchange-traded funds have generated considerable buzz in the investor community in recent years, as well as substantial return. According to IndexUniverse, ETFs gathered more than $119 billion in net new money in 2011, compared to Morningstar's estimate of a $58.58 billion influx to traditional mutual funds last year.

However, assets in ETFs accounted for only 8% of total net assets managed by investment companies at year-end 2010, according to Investment Company Institute and Strategic Insight Simfund. In employer-sponsored 401(k) plans, mutual funds continue to make up the bulk of portfolios, but as the advantages of ETFs enter the media spotlight, some plan sponsors are integrating them in their 401(k) plan or carving out a brokerage window for savvy participants to freely trade.

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