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1.
How do investors buy and sell most exchange-traded funds?
Through a broker. Because these shares trade on an exchange, investors have to go through a broker to buy and sell shares. Only the very wealthy can sell shares back to the sponsoring fund family. And when they do, they won't get cash back, but shares of the ETF's underlying holdings.
2.
In general, exchange-traded funds are cheaper to buy than index mutual funds if you want to trade regularly.
False. Because of their commissions, regular trading will likely cost you more with exchange-traded funds.
3.
What are exchange-traded funds?
Baskets of securities that are traded on an exchange. ETFs are part mutual fund, part stock.
4.
Which statement is false about exchange-traded funds?
ETFs are always the cheaper choice for all investors. Although the annual expenses of ETFs are below those of mutual funds, you must pay a commission each time you buy an ETF. As a result, ETFs may not be cheaper choices for investors who invest a little bit at a time, or those who trade actively.
5.
Because their shares are sold to other investors rather than redeemed, exchange-traded funds do not need to buy and sell stocks.
False. ETFs do at times need to buy and sell stocks, but it is in order to adjust for changes to their underlying indexes.