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1.
Which statement below is true?
Exchange-traded funds offer investors a way to invest in a corner of the market without having to load up on just one or two individual stocks. As such, investors find them helpful for gaining limited exposure there.
2.
Commodity or currency exchange-traded funds _______.
Can provide diversification to a portfolio in small doses. Commodities and currencies can be uncorrelated to broader stock market returns and can therefore help diversify portfolios.
3.
If you incur a lot of costs while investing in exchange-traded funds, those costs will most likely be _______.
Brokerage commissions. Overhead is pretty low because the need for it is low. But you will need to pay brokerage commissions for buying and selling, and they will add up if you trade a lot.
4.
If you want to buy or sell into an exchange-traded fund, you can do so with the fund itself, like with a mutual fund.
False. Exchange-traded funds are different in this respect. You must do your trading with other investors, not the fund itself.
5.
Exchange-traded funds are a cost-effective choice for investors who _______.
Use discount brokers, invest a large lump sum of money, and are willing to hold the investment for the long term. For others, an exchange-traded fund may not have a big cost advantage over a plain-vanilla, low-cost index fund.
