NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Collective Investment Vehicles
Which statement about an Exchange Traded Fund (ETF) is correct?
An ETF's units are listed and traded on a stock exchange at market prices during trading hours. Investors therefore need demat and trading accounts. ETFs are mostly passive with low expenses, and retail investors usually exit by selling on the exchange rather than redeeming with the fund house.
- AIts units are bought and sold on a stock exchange at market prices during trading hoursCorrect
- BIt can only be redeemed from the fund house at the end-of-day NAV by retail investors
- CIt always has a higher expense ratio than an actively managed fund
- DIt does not require a demat account to hold units
Explanation
ETF units are listed and trade on exchanges throughout the day, so a demat account and a trading account are needed. Retail investors normally transact on the exchange, not with the fund house. ETFs are usually passive and tend to have lower, not higher, expense ratios.
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