By John Waggoner, USA TODAY

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ETFs are mutual funds that trade on the stock exchanges. ETF assets have soared to $1.2 trillion in March from $151 billion in 2002, according to the Investment Company Institute. the funds’ trade group.

Initially, ETFs were the domain of traders, because you could buy and sell them at any time during trading hours. Traditional open-ended mutual funds are priced once a day, after the exchanges close.

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Now ETFs are making their way into tax-deferred savings plans, albeit slowly. State Street Global Advisors rolled out an all-ETF 529 plan in April. The SSgA Upromise 529 plan, a new arrangement with the state of Nevada, offers three all-ETF options:

•College-date portfolios, which are managed to be less risky as your child approaches college age.

•Risk-based portfolios, designed to fit aggressive, moderate and conservative investors.

•Static portfolios, which allow you to create your own ETF portfolio.

Investors can change their portfolios only once a year, so people can’t day trade with their child’s college savings plan.

The main advantage is cost, says Steve Coyle, director of U.S. subadvisory services for SSgA. The average annual cost for the portfolios is 0.49%, vs. 0.87% for open-end funds, Coyle says.

Like many ETF-based offerings, the plan is attractive to investment advisers, who can create portfolios for clients, charge fees for the service and still be cost-effective.

ETFs are starting to creep into corporate 401(k) plans, but slowly. Charles Schwab & Co. for example, plans to launch an all-ETF 401(k) later this year.

We’re looking at driving costs down, says Steve Anderson. senior vice president of retirement plan services at Schwab.

Annual fees for a 401(k) with ETFs or index funds could be less than 0.2%, Anderson says. With third-party investment advice, it could be about 0.65%.

Overall, though, ETF use isn’t big in 401(k) plans, says Fidelity Investments. the largest 401(k) plan administrator.

There has been a lot of noise about it but not a growing demand, says Jeanne Thompson, vice president of retirement insights at Fidelity.

Most 401(k) investors can buy ETFs if the plan has a brokerage option, Thompson says. About 38% of plans have the brokerage option, and only 2.4% of 401(k) plan participants make use of it, she says.

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