Which statement is true about ETFs relative to traditional open-end funds?

Which statement is true about ETFs relative to traditional open-end funds?

• A. May trade intraday at current prices.
• B. Must be purchased directly from the fund issuer.
• C. Do not trade through a broker.
• D. Always have higher tax costs.

Answer: (A)

ETFs trade on an exchange like stocks, so you can buy or sell them during the trading day at current market prices. That intraday trading is what distinguishes them from traditional open-end funds, which are priced only once per day after the market closes based on the fund’s net asset value and aren’t bought or sold at intraday prices. Other statements miss the mark for these reasons: ETFs aren’t purchased directly from the fund issuer; you buy them through a broker on an exchange. They do trade through a broker, just like any other listed security. And while ETFs are often tax-efficient due to their in-kind creations/redemptions, they do not inherently have higher tax costs in all cases.

ETFs trade on an exchange like stocks, so you can buy or sell them during the trading day at current market prices. That intraday trading is what distinguishes them from traditional open-end funds, which are priced only once per day after the market closes based on the fund’s net asset value and aren’t bought or sold at intraday prices.

Other statements miss the mark for these reasons: ETFs aren’t purchased directly from the fund issuer; you buy them through a broker on an exchange. They do trade through a broker, just like any other listed security. And while ETFs are often tax-efficient due to their in-kind creations/redemptions, they do not inherently have higher tax costs in all cases.