What is a primary characteristic of ETFs?

ETFs, or Exchange-Traded Funds, are primarily characterized by the fact that they are traded on stock exchanges just like individual stocks. This allows investors to buy and sell ETF shares throughout the trading day at market prices, providing liquidity and flexibility that isn't typically available with mutual funds, which are usually only transacted at the end of the trading day.

The trading structure of ETFs enables investors to take advantage of price changes throughout the day, utilize limit orders, and employ various trading strategies, such as short selling. This dynamic aspect attracts many investors because it combines the benefits of mutual funds, such as diversification, with the trading features of stocks.

Other options do not accurately reflect the nature of ETFs. For example, ETFs are generally passively managed, tracking an index rather than being actively managed by fund managers. Additionally, management fees vary among ETFs, and while they tend to be lower than those for actively managed funds, they are not unlimited, which distinguishes them further from other investment options.