Exchange-Traded Funds (ETFs) are designed to be highly liquid and are known for their low expense ratios (fees) compared to many traditional mutual funds, especially actively managed ones. ETFs trade on stock exchanges throughout the day, providing intra-day liquidity, unlike mutual funds whose trades are settled only once per day at the Net Asset Value (NAV). Therefore, the statement that ETFs typically have lower daily liquidity and higher fees than mutual fund shares is incorrect.
Which one of the following statements about Exchange-Traded Fund (ETF) is not correct?
Asked in UPSC CDS 1 2018 · Topic: Money & Banking (Financial Markets: Money Market and Capital Market (Components, Instruments, Role))
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Answer: C. It typically has lower daily liquidity and higher fees than mutual fund shares.
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