What is a distinguishing feature of ETFs compared to mutual funds?

The distinguishing feature of ETFs (Exchange-Traded Funds) compared to mutual funds is that ETFs are traded on stock exchanges. This means that ETF shares can be bought and sold throughout the trading day at market prices, similar to individual stocks. This trading flexibility allows investors to react to market movements in real-time, making ETFs more dynamic than mutual funds, which are typically only traded at the end of the trading day at their net asset value (NAV).

Additionally, ETFs generally tend to have lower expense ratios compared to mutual funds, making them a cost-effective investment option. Unlike the notion of actively managed funds, many ETFs are passively managed, meaning they often track an index rather than trying to outperform it through active trading strategies. Finally, ETFs typically do provide dividends, which can be distributed to shareholders, aligning them more closely with mutual funds in this aspect rather than contrary to it. Therefore, the characteristic of being traded on stock exchanges is indeed what sets ETFs apart from mutual funds.