Understanding Key Features of ETFs

Hard Passive Equity Investing Exchange-traded Funds

John is an investment advisor managing a diversified portfolio primarily for institutional clients. He is considering incorporating Exchange-Traded Funds (ETFs) to enhance the portfolio's liquidity and reduce investment costs. John is particularly interested in understanding the implications of using ETFs compared to traditional mutual funds.

Considering the characteristics of ETFs, which of the following statements accurately reflects a key feature of ETFs that could influence John's decision to include them in his strategy?

ETFs are generally subject to higher management fees compared to traditional mutual funds.

ETFs can be traded throughout the day on an exchange, allowing for real-time pricing and flexibility.

ETFs require investors to hold them for a minimum period to avoid capital gains tax.

Hint

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