Advantages that ETFs have over funds that track the same index include
I. Trades are executed promptly at the current NAV.
II. The portfolio is carefully curated by a professional manager.
III. Commissions on trades may be lower than management fees.
IV. They can be sold and converted to cash more quickly than mutual fund shares.

Question

Quizplus · Accepted Answer

I, III, and IV are correct. ETFs trade like stocks, allowing for prompt execution at market prices (not necessarily the NAV), potentially lower commission costs compared to mutual fund management fees, and quicker conversion to cash compared to mutual funds. II is incorrect because, like index funds, ETFs typically track an index rather than being actively managed by a professional manager.

Advantages That ETFs Have Over Funds That Track the Same