CFA Practice Question

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CFA Practice Question

The major difference between an index mutual fund and an ETF is that ______
A. ETF investors buy fund shares directly from the ETF fund.
B. ETF investors can purchase shares on margin.
C. ETFs often reinvest dividends.
Explanation: A. An ETF investor buys ETF shares from other investors.
B. They can short shares too.
C. The dividends are paid out to the shareholders.

User Contributed Comments 2

User Comment
clipp One thing to note, Mutual Funds are marginable after holding for a period of time but not immediately marginable.
cwong2013 wait.. with regards to mutual funds- where you are investing in a portfolio which replicates an index, why can't you use a margin account where you borrow to invest in this fund/vehicle?

Sorry if this is a stupid question- just didn't realise this.
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