Which statement accurately describes the difference between a managed fund and an ETF?

• A. Managed fund issues units; ETF trades on exchange; ETFs typically lower fees and intraday trading flexibility; both track assets
• B. ETFs issue units; managed funds trade on exchange; both have higher fees
• C. ETFs are not traded on exchanges and do not track assets
• D. ETFs issue units; managed funds trade on exchange; ETFs typically lower fees and intraday trading flexibility; both track assets

Answer: (B)

The key idea is how they’re bought, sold, and priced, which also drives the fee differences. Exchange-traded funds are listed on a stock exchange and you can buy or sell them during trading hours at market prices. Their price moves intraday, and they usually have lower ongoing fees, often because many are passively managed and because of the efficient creation/redemption process that helps keep the market price close to the fund’s underlying value. Traditional managed funds aren’t traded on an exchange; you buy or redeem units directly with the fund company at the end-of-day net asset value (NAV). This means no intraday trading, and fees tend to be higher, especially for actively managed funds. So the core distinction is trading on an exchange with intraday pricing and typically lower fees for ETFs versus buying/selling at NAV with higher fees for managed funds. The option that describes ETFs as issuing units and managed funds trading on an exchange, and implying higher fees for both, doesn’t align with how ETFs and managed funds actually operate.