Final answer:
Exchange-traded funds (ETFs) in Canada have characteristics such as being traded on a stock exchange, diversification, passive management, liquidity, transparency, lower expenses, and tax efficiency.
Step-by-step explanation:
Exchange-traded funds (ETFs) in Canada have several characteristics:
- Traded on a stock exchange: ETFs are traded on stock exchanges, just like individual stocks.
- Diversification: ETFs hold a diversified portfolio of securities, which can include stocks, bonds, or commodities.
- Passive management: ETFs typically aim to replicate the performance of a specific index or sector, rather than actively picking individual investments.
- Liquidity: ETFs can be bought or sold throughout the trading day at market prices.
- Transparency: ETFs disclose their holdings on a daily basis, allowing investors to know exactly what is included.
- Lower expenses: ETFs tend to have lower expenses compared to actively managed mutual funds.
- Tax efficiency: ETFs are structured in a way that can minimize capital gains taxes for investors.