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1.
Exchange-traded funds charge commissions.
True. Unlike their competitors the no-load index funds, ETFs do charge commissions.
2.
Compared to mutual funds, exchange-traded funds are ______ to make capital-gains distributions.
Less likely. However, at times they must, in order to adjust for changes to their underlying indexes.
3.
What are exchange-traded funds?
Baskets of securities that are traded on an exchange. ETFs are part mutual fund, part stock.
4.
Exchange-traded funds are always cheaper to buy than mutual funds.
False. If you trade frequently, ETFs will likely be more expensive than mutual funds, due to the commissions.
5.
The price of an exchange-traded fund on the market is _______.
Either the net asset value or a price higher or lower than that. Exchange-traded funds do not necessarily trade at the net asset values of their underlying holdings; they are sometimes higher or lower, based on demand and other factors.
