Which of the following is NOT an advantage of ETFs?

The correct answer identifies high management fees as not being an advantage of Exchange-Traded Funds (ETFs). One of the primary benefits of ETFs is their cost efficiency compared to mutual funds, which often come with higher management fees.

ETFs typically have lower expense ratios due to their passive management style, which aims to replicate the performance of an index rather than actively selecting securities. This helps to keep costs down for investors. Additionally, ETFs are known for their transparency, as they regularly disclose their holdings, allowing investors to see exactly what assets comprise their investment. Furthermore, ETFs offer the advantage of diversification since they can hold a variety of assets, thereby spreading risk across different securities or asset classes.

In summary, while transparency, lower trading expenses, and diversification are all key benefits of ETFs, high management fees do not fit within the context of their advantages. This understanding is essential for evaluating the cost-effectiveness and value proposition of ETFs in investment strategies.