Etfs

Exchange-Traded Funds (ETFs) ## ETFs vs. Mutual Funds: The Core Difference An Exchange-Traded Fund (ETF) is a basket of securities that trades on an exchange like a stock throughout the day. The critical distinction from a mutual fund is *when and how you trade it*. Mutual fund: You submit a buy or sell order at any time during the trading day, but it executes at the end-of-day NAV, calculated after 4:00 PM ET. No matter when you place the order — 10:00 AM or 3:59 PM — you get the same end-of-day price. ETF: Trades continuously throughout the day on a stock exchange. If you buy at 10:00 AM, you get the market price at 10:00 AM. You can use limit orders, stop orders, and sell short — exactly like trading an individual stock. Real-world analogy: A mutual fund is like ordering a pizza and getting it at whatever price the restaurant sets at closing time. An ETF is like buying groceries at a store — the price is posted on the shelf, you see it before you buy, and it can change throughout the day. This flexibility matters for active traders, tactical asset allocators, and hedgers who need intraday price certainty. For long-term buy-and-hold investors, the intraday trading capability is largely irrelevant — but the lower cost structure still matters. --- ## The Creation/Redemption Mechanism: Why ETF Prices Stay Close to NAV This is one of the most tested ETF concepts on the Series 7. Authorized Participants (APs) are large institutional firms — major broker-dealers like Goldman Sachs or Citadel — that have formal agreements with ETF sponsors. Only APs can create or redeem ETF shares directly with…