Series 7 practice questioneasyPackaged Products — ETFs
Compared to actively managed mutual funds, most ETFs have:
- AHigher expense ratios
- BNo expense ratios at all
- CIdentical expense ratios
- DLower expense ratios✓ Correct answer
Explanation
Why D — Lower expense ratios
Most ETFs are passively managed and track an index, resulting in lower expense ratios than actively managed mutual funds. The average expense ratio for an index ETF can be as low as 0.03%-0.20%, compared to 0.50%-1.50% or more for actively managed mutual funds. This cost advantage is one of the primary reasons for ETF popularity.
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