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ETF Liquidity A Growing Point Of Financial Industry Contention

TedTed
in Fund Discussions
FYI: For a lot of financial advisers, the primary appeal of exchange-traded funds boils down to low fees and liquidity. There is no disputing the low fees, which provide investors with varied and broad market exposure for mere basis points, in most cases. But the liquidity has become a growing point of contention throughout the financial services industry and is something advisers using ETFs need to follow.
Regards,
Ted
http://www.investmentnews.com/article/20160710/FREE/307109998?template=printart

Comments

  • MOZART325
    For large trades, open-end mutual funds are often superior to ETFs because there is no bid-asked spread. SPY is liquid with a tiny spread, but many of the less liquid ETFs can cost you 0.25% or more. On a $200,000 trade, that is $500 or more.
  • Edmond
    I think the benefits of ETFs vs OEFs are being oversold. Low E/Rs are great --- but those can be had by OEF investors too - Vanguard OEFs are certainly not expensive.

    The biggest DIS-advantage of OEFs for this writer are inconveniences imposed by sundry of the OEF firms themselves. Obviously, mainly assess sales-loads (front, back or level loads). But even sundry of the "no load" companies charge s/t trading fees which in some cases may be 1% or 2% of proceeds being liquidated. Then too, OEF investors (at least some of us) have to worry about OEF companies imposing soft- or hard-closings. Then too, brokerage fund supermarkets sometimes discontinue offering (or never begin to offer) OEF products. Compare that to ETFs, where most of the top-tier brokerages actually subsidize investors to invest in ETFs via NTF programs they offer.

    These are all "back office" type issues --- most of them created by the OEF industry, but they can be quite annoying, and don't seem to pop up with ETFs. After all, you'd have to be a profoundly stupid investor to buy a "loaded" ETF, even if one were offered.

    Still, I prefer the OEF vehicles, and have the overwhelming majority of my invested dollars in them vs. ETFs.
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