ETFs can be traded throughout the day, like stocks. Most are passively managed, meaning that the investing portfolio tracks an index.
In contrast, mutual funds can only be bought or sold once daily, and many of the largest mutual fund companies remain focused on actively managed portfolios where performance depends on the stock-picking skills of portfolio managers.
The expense ratios of index ETFs are typically lower than those of actively managed mutual funds, though that is also the case with traditional index mutual funds.
ETFs do offer tax benefits over all traditional mutual funds.
"We use ETFs because there is a tax advantage for our clients," said Avani Ramnani, a CFP and director of financial planning and investment management for Francis Financial. "Mutual funds [commonly] pass on capital gains to investors, and there can be lots of complexities to that."
Read MoreDon't trust just any retirement calculator
Those capital gains can be unpredictable, which makes tax planning tricky for investors who have assets in a taxable mutual fund. Capital gains with ETFs are less likely, simply because of their makeup and how they are traded.
Nevertheless, Ramnani said her firm uses actively managed mutual funds for bonds and international investments, because both asset classes benefit from management expertise regardless of what the market is doing.