2.15 Exchange-Traded Funds (ETFs)
ETFs combine the diversification of mutual funds with the intraday liquidity and trading flexibility of individual stocks.
Key FINRA Exam Takeaways
- Track an index (e.g. S&P 500), commodity, or sector.
- Trade continuously on stock exchanges throughout the trading day at market prices.
- Marginable and shortable: can be bought on margin and sold short (unlike mutual funds).
- Lower expense ratios and greater tax efficiency than mutual funds due to in-kind creation/redemption.
- Investors pay brokerage trading commissions rather than sales loads.
Interactive Knowledge Checkpoint • Section 2.15
Which of the following features is an advantage of Exchange-Traded Funds (ETFs) over open-end mutual funds?