SIE practice questioneasyETFs vs Mutual Funds
Which of the following is an advantage ETFs have over traditional open-end mutual funds?
- AETFs have no management fees
- BETFs can be bought and sold throughout the trading day at market prices✓ Correct answer
- CETFs guarantee positive returns
- DETFs are insured by the FDIC
Explanation
Why B — ETFs can be bought and sold throughout the trading day at market prices
ETFs can be traded throughout the trading day at real-time market prices, while mutual funds can only be bought or sold at the end-of-day NAV. This intraday trading capability allows investors to react quickly to market events. ETFs DO have management fees (C), though they tend to be lower than mutual fund fees. They do NOT guarantee returns (A) and are NOT FDIC-insured (D).
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