Which characteristic differentiates an Exchange-Traded Fund (ETF) from a traditional open-end mutual fund?

Question: Which characteristic differentiates an Exchange-Traded Fund (ETF) from a traditional open-end mutual fund?

Answer options:

• ETFs can only hold bonds, while mutual funds hold stocks. ✅ ETFs are typically bought and sold throughout the trading day on an exchange, while mutual funds are priced once daily.
• ETFs are always actively managed, whereas mutual funds are always passively managed.
• ETFs always have higher management expense ratios (MERs) than mutual funds.

Correct answer: ETFs are typically bought and sold throughout the trading day on an exchange, while mutual funds are priced once daily.

Explanation: ETFs trade on stock exchanges like individual stocks, allowing for continuous buying and selling at market prices, unlike mutual funds which are priced at end-of-day Net Asset Value (NAV).