How do mutual funds and ETFs primarily differ in trading?

Mutual funds and ETFs differ primarily in how they are traded throughout the day. Mutual funds are bought and sold based on their net asset value (NAV), which is calculated at the end of the trading day. This means that all orders for mutual funds placed during the day are executed at the same price, which is determined after the market closes. This characteristic is a fundamental feature of mutual fund transactions.

In contrast, ETFs (Exchange-Traded Funds) are traded like stocks on an exchange, meaning they can be bought and sold at any time during trading hours at varying prices that fluctuate throughout the day based on supply and demand. This allows investors to take advantage of short-term market movements.

While the other options mention aspects related to ETF trading or mutual funds, they do not accurately convey the distinct characteristic highlighted in the correct answer regarding mutual fund pricing and transactions. Thus, understanding that mutual funds transact at their calculated prices at day’s end underlines the key difference.