How do ETFs differ from mutual funds in trading?

How do ETFs differ from mutual funds in trading?

• A. ETFs are priced once daily; mutual funds trade intraday
• B. ETFs trade on exchanges like stocks with intraday pricing; mutual funds are bought/sold at end-of-day NAV
• C. ETFs are bonds; mutual funds are equities
• D. ETFs require minimum trading blocks; mutual funds have no minimums

Answer: (B)

Trading mechanics and pricing are different for ETFs and mutual funds. ETFs are bought and sold on an exchange just like stocks, so their prices move throughout the trading day and you place orders with a broker to trade at those intraday prices. Mutual funds, on the other hand, are not traded on an exchange; they are bought and sold directly with the fund company, and the price you receive is the end-of-day net asset value. That means ETF prices update in real time during market hours, while mutual fund prices are fixed at one NAV per trading day after the market closes. The other statements miss this fundamental distinction: ETFs do not price only once daily, and mutual funds do not trade intraday; the asset class isn’t limited to equities vs. bonds in this context, and ETFs don’t require minimum trading blocks in the way described.

Trading mechanics and pricing are different for ETFs and mutual funds. ETFs are bought and sold on an exchange just like stocks, so their prices move throughout the trading day and you place orders with a broker to trade at those intraday prices. Mutual funds, on the other hand, are not traded on an exchange; they are bought and sold directly with the fund company, and the price you receive is the end-of-day net asset value. That means ETF prices update in real time during market hours, while mutual fund prices are fixed at one NAV per trading day after the market closes. The other statements miss this fundamental distinction: ETFs do not price only once daily, and mutual funds do not trade intraday; the asset class isn’t limited to equities vs. bonds in this context, and ETFs don’t require minimum trading blocks in the way described.