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1.
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.
2.
Exchange-traded funds are a type of mutual fund.
False. Exchange-traded funds are not mutual funds; they are baskets of securities that are traded on an exchange. They are actually part mutual fund, part stock.
3.
In what form do investors buy or redeem shares from an exchange-traded fund?
In blocks of a certain number. The blocks are typically in groups of 50,000 shares.
4.
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.
5.
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.
