Nov. 16--Larry Carrel is a big fan of exchange traded funds.

The Amherst native and former Smart- Money.com columnist calls ETFs "mutual funds for the 21st century" and touts them as a cost-effective way for investors to broadly diversify their portfolios.

Mutual funds do that too, but Carrel thinks ETFs are better because their fees are lower and they can be traded during the day, like a regular stock, rather than only after the stock market closes for the day, as with a mutual fund.

"It gives the investor a lot more control and a lot more power," says Carrel, the author of a new book called "ETFs for the Long Run."

Carrel admits that buying stocks isn't on the top of most investors minds these days, especially with the Standard & Poor's 500 index down 40.5 percent this year. But in spite of the short-term pain, he says investors need to think about the long term.

"If you believe America will come back and the American economy will come back, you need to be invested in the stock market," he says.

To Carrel, the best way to do that is through ETFs, which trade like a stock but are actually broad-based portfolios that mimic major stock market indexes or invest in specific industries or certain countries or regions.

"They're index funds, mainly," says Carrel, who estimates that 95 percent of the 700 ETFs now trading are designed to mimic a certain index.

Because most ETFs aren't actively managed, they also tend to have lower expenses than mutual funds, allowing investors to put more of their money into their portfolios, instead of the pockets of their fund company.

"The one thing you can control is fees," says Carrel, a 1981 Williamsville North High School graduate. "Ninety-nine percent of the time, the ETF is going to give you the lower cost for the same strategy."

Because ETFs can be bought and sold during the day, investors have even more control over the timing of their sales and purchases -- which could be a valuable advantage for investors in these volatile days, when it's not unusual for the stock market to rise and fall by 5 percent in a single day.

Exchange traded funds also tend to be more tax-efficient than mutual funds, which must distribute their accumulated capital gains to investors each year.

In a down market like this, that can leave mutual fund investors with an unhappy surprise: Their funds are way down for the year, but they also face a significant tax bill on capital gains because the fund had to sell shares to meet the demand for redemptions during the sell-off.

Most exchange traded funds don't distribute capital gains annually.