ETF

The Ugly Truth About ETFs Is Revealed (In A Footnote)

"[This assumes] the ETF secondary market remains balanced between buyers and sellers. this higher liquidity profile of ETF assumes secondary market liquidity does not disappear, which may be the case in theory during a sell-off or a one-way market. In these instances, the client (sale) order execution would require tapping underlying market liquidity. ETF liquidity would then just be the same as that of the underlying assets. If these underlying exposures are not liquid, ETFs would be not liquid either."

"[This assumes] the ETF secondary market remains balanced between buyers and sellers. this higher liquidity profile of ETF assumes secondary market liquidity does not disappear, which may be the case in theory during a sell-off or a one-way market. In these instances, the client (sale) order execution would require tapping underlying market liquidity. ETF liquidity would then just be the same as that of the underlying assets. If these underlying exposures are not liquid, ETFs would be not liquid either."
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4 comments on “The Ugly Truth About ETFs Is Revealed (In A Footnote)

  1. Mike (not that Mike)

    Yes. And then yes again.

    But so long as the music is playing and central banks keep the liquidity flowing into the market, nobody (almost nobody) cares. What will be the timing or event that really makes a difference?

  2. At least on the retail side, aka my side, I imagine almost nobody could tell you the majority of the stocks or bonds held by a given ETF that they have shares in, and only a slightly larger proportion could tell you how that ETF tracks them.

    I suppose ETFs that hold government bonds might be an exception. Still, if history has shown me anything, it’s that the best investment strategy is not to know what companies you’re invested in and to never try to time the market by selling ahead of a crash.

  3. Colin Booth

    Are ETFs are the next CDs .?

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