Key Feature of ETFs in Passive Equity Investing

Easy Passive Equity Investing Exchange-traded Funds

John is considering investing in Exchange-Traded Funds (ETFs) as part of his passive equity investing strategy. He has heard that ETFs can provide a cost-effective way to gain exposure to a diversified portfolio of stocks. However, he is unsure about the benefits and trade-offs involved in using ETFs in comparison to traditional mutual funds.

Which of the following statements correctly describes a key feature of ETFs as a passive investment vehicle?

ETFs are traded on stock exchanges throughout the trading day, allowing investors to buy and sell them at market prices.

ETFs typically have higher fees than traditional mutual funds due to active management.

ETFs are only available for trading once at the end of each trading day, similar to mutual funds.

Hint

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