Which of the following is a primary characteristic that distinguishes an Exchange Traded Fund (ETF) from a traditional open-end mutual fund?

Question: Which of the following is a primary characteristic that distinguishes an Exchange Traded Fund (ETF) from a traditional open-end mutual fund?

Answer options:

• ETFs can only hold equities, while mutual funds can hold various asset classes. ✅ ETFs are priced continuously throughout the trading day, while mutual funds are priced once at day's end.
• Mutual funds always have lower management expense ratios (MERs) than ETFs.
• ETFs are always actively managed, whereas mutual funds are always passively managed.

Correct answer: ETFs are priced continuously throughout the trading day, while mutual funds are priced once at day's end.

Explanation: A key difference is that ETFs are traded on stock exchanges and are priced continuously throughout the trading day, similar to stocks. In contrast, open-end mutual funds are priced only once per trading day after the market closes, based on their end-of-day Net Asset Value (NAV).