Which statement about ETFs versus mutual funds is most accurate about costs and trading?

• A. Mutual funds always have lower costs than ETFs.
• B. ETFs are bought and sold only at end of day like mutual funds.
• C. ETFs are better suited for long-term buy-and-hold compared to trading.
• D. ETFs often have lower costs and intraday trading.

Answer: (D)

Costs and trading behavior differentiate ETFs from mutual funds. ETFs generally offer lower ongoing costs because many are passively managed, resulting in lower expense ratios and simpler administration. They also trade on stock exchanges, so you can buy or sell shares throughout the trading day at current market prices and use intraday pricing strategies. This intraday trading capability contrasts with mutual funds, which are bought or sold only at the end of the day at the fund’s net asset value. Keep in mind that trading ETFs can involve bid-ask spreads and potential commissions, but even with those costs, the overall expense profile and the ability to trade during market hours make ETFs often cheaper and more flexible for active trading than mutual funds.