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ETFs 114: Exchange-Traded Fund Best Practices

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1.
Bid-ask spreads on exchange-traded funds tend to be widest near _______.
Choose wisely. There is only one correct answer.
Market-open.
2.
What is the term for the sum of the value of the constituents of an exchange-traded fund's underlying basket?
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Net asset value (NAV). Net asset value is the aggregate value of the underlying securities. This can be found every 15 seconds throughout the day by referencing the intraday indicative value (IIV) index. This is a tool used to measure the current market price throughout the day.
3.
For domestic exchange-traded funds, the best time to trade is _______.
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The middle of the trading day.
4.
What does the intraday indicative value index show investors about exchange-traded funds?
Choose wisely. There is only one correct answer.
What the net asset value of the underlying holdings is worth at any given time. The IIV is an important tool for determining what an ETF is worth at any point.
5.
Which practice DOES NOT stand to minimize costs when trading exchange-traded funds?
Choose wisely. There is only one correct answer.
Using market orders. High liquidity and trading near the middle of the day allow investors to capitalize on the thinnest bid/ask spreads, which minimizes costs.