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Tradability

Clearly, ETFs offer some advantages relative to mutual funds when it comes to how they can be bought and sold. A mutual fund (as opposed to a closed-end fund) has to be purchased from the investment company and sold back to the company. Therefore, if you own Fidelity's Equity-Income Fund, which you bought from Fidelity, you must contact Fidelity and instruct them to redeem the shares when you are ready to sell.

The pricing of mutual funds occurs once a day, at 4 p.m. when the markets close. If an investor desperately wishes to liquidate a mutual fund position at 10 in the morning, he or she is out of luck. The market may decline 500 points between 10 a.m. and 4 p.m., but there is nothing you can do. Conversely, the market may rise 500 points in that time, but you can't buy into the fund at that point.


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