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    Question

    ETFs have grown in popularity due to their transparency,

    cost-effectiveness, and ease of access.  Which of the following is NOT a benefit of ETFs?
    A Diversification Correct Answer Incorrect Answer
    B Liquidity Correct Answer Incorrect Answer
    C Lower fees compared to mutual funds Correct Answer Incorrect Answer
    D Exposure to specific market segments Correct Answer Incorrect Answer
    E Guaranteed returns Correct Answer Incorrect Answer

    Solution

    An Exchange-Traded Fund (ETF) is an investment fund that holds a collection of assets, such as stocks, bonds, or commodities, and is traded on stock exchanges throughout the day, much like individual stocks. ETFs combine the diversification benefits of mutual funds with the trading flexibility of stocks.  Diversification, liquidity, lower fees, and exposure to specific market segments as benefits of ETFs. ETFs do not give guaranteed returns; they are market-linked investments, meaning their value goes up and down with the performance of their underlying assets (stocks, bonds, commodities) and the overall market.

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