SIE practice questionhardETFs
Which of the following best explains why ETFs experience lower capital gains distributions than mutual funds?
- AETF shares are created and redeemed in kind, minimizing the need to sell portfolio securities✓ Correct answer
- BETF portfolios are never rebalanced
- CETFs are exclusively passively managed
- DETFs do not invest in stocks
Explanation
Why A — ETF shares are created and redeemed in kind, minimizing the need to sell portfolio securities
In-kind share transactions generally prevent taxable gains. ETFs can be actively managed, may hold stocks, and can be rebalanced, so B, C, and D are incorrect.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Related Investment Companies & Packaged Products questions
- A withdrawal from a 529 college savings plan used for non-qualified expenses will result in:
- Which scenario best illustrates the risk associated with a UIT’s fixed portfolio?
- Which regulatory feature applies to most hedge funds?
- When purchasing mutual fund Class C shares, what is the typical cost structure?