Exchange-Traded Products: Rapid Fire

What this video covers

• How exchange-traded products (ETPs) trade continuously at market price, can be bought on margin or sold short, and carry bid-ask spreads, unlike mutual funds that price once daily at net asset value (NAV)
• Why exchange-traded funds (ETFs) hold portfolios of securities and generally have no issuer credit risk
• How authorized participants (APs) use in-kind creation and redemption to keep an ETF's market price close to NAV, and why individual investors trade only on the secondary market
• The difference between passive ETFs that track an index and active ETFs that seek to beat a benchmark, including the related expense and turnover differences
• Why exchange-traded notes (ETNs) are unsecured senior bank debt with no underlying securities, a fixed maturity of 10 to 30 years, and issuer credit risk
• The core memory aid: ETF means fund, tracking error, and no issuer credit risk; ETN means note, no tracking error, and credit risk
• How premium-or-discount pricing, bid-ask spreads, dollar-cost averaging, breakpoints, letters of intent (LOI), rights of accumulation (ROA), and 12b-1 fees create mutual fund and ETF exam traps