General Securities Representative (Series 7) Practice Exam – Your All-in-One Guide to Exam Success!

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What is one key difference between ETFs and mutual funds?

ETFs usually have higher fees

ETFs can be traded throughout the day

One key difference between ETFs (Exchange-Traded Funds) and mutual funds lies in the trading flexibility provided by ETFs. ETFs can be bought and sold throughout the trading day on an exchange, similar to individual stocks. This allows investors to take advantage of price fluctuations in real-time, enabling them to react to market movements more swiftly than they could with mutual funds. In contrast, mutual funds are typically bought or sold at the end of the trading day at a price based on their net asset value (NAV).

This real-time trading aspect of ETFs enhances liquidity and gives investors greater control over their transactions, making it a distinct characteristic that separates them from mutual funds. Additionally, the ability to execute trades at any moment throughout the day allows for various trading strategies, such as day trading or short-term investments, which are not feasible with mutual funds.

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Mutual funds are traded on an exchange

ETFs cannot be sold short

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