The major difference between mutual funds and exchange traded funds (ETFs) is
A) ETFs can be bought or sold at their current price at any time during normal trading hours.
B) mutual fund portfolios are always based on one of the major market indexes.
C) ETFs invest in broadly diversified portfolios of securities.
D) ETFs are actively managed.

Question

Quizplus · Accepted Answer

ETFs can be bought and sold on an exchange at their current market price during trading hours, similar to stocks. This contrasts with mutual funds, which are bought and sold based on their price at the end of the trading day. Mutual funds can be either actively or passively managed and do not necessarily track a market index, unlike what is suggested in option B. Both ETFs and mutual funds can invest in diversified portfolios, making C incorrect. D is incorrect because ETFs can be either actively or passively managed, though most are passively managed, tracking an index.

The Major Difference Between Mutual Funds and Exchange Traded Funds