Which statement is true about ETFs in terms of trading flexibility and cost?

• A. ETFs trade on an exchange like a stock throughout the day and often have lower expense ratios.
• B. ETFs trade only once per day at NAV.
• C. ETFs do not have expense ratios.
• D. ETFs must be held for at least one year before trading.

Answer: (A)

ETFs give trading flexibility and typically cost less to own. They trade on an exchange just like stocks, so you can buy or sell during the trading day at real-time prices and use orders such as market, limit, or stop orders. At the same time, they usually carry lower expense ratios because many ETFs track an index and use passive management, which tends to be cheaper than actively managed funds.

That combination is what makes this statement true. Trading only once per day at NAV would describe some mutual funds, not ETFs, and ETFs do have expense ratios (they’re charged as an annual percentage of assets). There’s no requirement to hold an ETF for a year before you can trade it—the market allows buying and selling anytime during trading hours, subject to any broker-specific rules or tax considerations.