Advantages of ETFs in Passive Equity Investing

Exchange-Traded Funds (ETFs) have become increasingly popular as a vehicle for passive equity investing. They offer investors an efficient way to gain exposure to a broad portfolio of stocks without the need for extensive research or individual stock picking. As a candidate for CFA Level 3, discuss the primary advantages of using ETFs within a passive equity investment strategy, including aspects such as diversification, cost-effectiveness, liquidity, and tax efficiency. Support your discussion with specific examples.