FYI: For individual stocks, liquidity is about trading volume and its regularity—more is better. For ETFs, there’s more to consider.
An ETF Isn’t A Stock
ETFs are often lauded for their liquidity and single-stock trading characteristics. Truth is, they’re similar.
If an ETF doesn’t trade a certain number of shares per day (e.g., 50,000), the fund is illiquid and should be avoided, right? Wrong. It’s a plausible assumption from a single-stock perspective, but with ETFs, we need to go to a level deeper. The key is to understand the difference between the primary and secondary liquidity of an ETF.
Regards,
Ted
http://www.etf.com/sections/features-and-news/etf-education-understanding-etf-liquidity
