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ETFs 114: Exchange-Traded Fund Best Practices

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1.
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.
2.
What trading practice keeps exchange-traded fund prices close to their net asset values?
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Arbitrage. With arbitrage, traders take advantage of the difference between the market price and the net asset value.
3.
What does the intraday indicative value index show investors about exchange-traded funds?
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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.
4.
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.
5.
For domestic exchange-traded funds, the best time to trade is _______.
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The middle of the trading day.
DONE