What is an ETF’s market price, and how is it determined?
An ETF’s market price is the price at which the ETF is bought or sold on the stock exchange just like a stock.
This price is determined by demand and supply in the market. If more people want to buy the ETF, the price may go up. If more people want to sell it, the price may go down.
However, ETFs are special because they also have something called a Net Asset Value (NAV), which reflects the value of all the underlying assets in the ETF (like the stocks or bonds it holds).
In most cases, the market price stays very close to the NAV because of a mechanism called arbitrage where professional traders step in to buy or sell if the market price moves too far away from the NAV.
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