alleryStart learning →How do retail investors buy and sell ETF shares?
ADirectly from the fund at the next calculated NAV
BIn creation units of 50,000 shares at a time
CThrough a one-time public offering of units
DOn national stock exchanges throughout the day
Answer & Solution
Correct answer: D. On national stock exchanges throughout the day
1. Unlike a mutual fund, an ETF does not sell or redeem individual shares directly with retail investors.
2. Its shares trade throughout the day on national stock exchanges at market prices.
3. Those market prices may or may not equal the NAV of the shares.
4. Creation units of 50,000 shares are the route used by Authorized Participants, not by retail buyers.
_Source: US SEC Office of Investor Education and Advocacy, "Mutual Funds and ETFs: A Guide for Investors", section How ETFs Work_
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