Question #18
Reading: Reading 35 Exchange-Traded Funds - Mechanics and Applications
PDF File: Reading 35 Exchange-Traded Funds - Mechanics and Applications.pdf
Page: 6
Status: Incorrect
Correct Answer: B
Your Answer: B
Question
Compared to long-term buy-and-hold ETF investors, investors that trade frequently are most likely to be concerned with:
Answer Choices:
A. management fees
B. trading costs
C. tracking error
Explanation
Because trading costs are incurred at the time of transaction only, annualized trading
costs diminish over a longer holding period. For investors that trade frequently, the
spread and commission (part of trading cost) are far more important components of the
total cost. For long-term, buy-and-hold investors, management fees are an important
component of the cost.