Quote:
Originally Posted by macker
Actually ETFs have greater liquidity than Mutual funds and this is why they are used so extensively by instutional investors to quickly enter and exit positions and they can be traded during market hours in addition to offering more specific and transparent mandates.
The degree of an ETFs liquidity depends on a combination of primary and secondary factors. Primary : the composition of the ETF, the trading volumes of the securities that make up the EFT and Secondary : the trading volume of the ETF itself and the investment environment. Generally large cap ETFs are the most liquid.
Being aware of how these factors affect an ETFs liquidity, and therefore its profitability, will improve results, which is especially important in investment environments like what we are seeing today where every basis point counts.
Also regarding active ETFs
http://www.bloomberg.com/news/2012-0...investors.html
Gross who manages the worlds largest mutual fund is getting "more active" in ETFs similar to the Horizons Alpha Pro approach but PIMCO would be much more liquid!
Even the father of indexing, Burton Malkiel, can't resist investing some of his money in actively managed mutual funds and individual stocks. It shouldn't be an all or nothing but what works best and adapt your portfolio based on that. Anytime you can get a very broad-based ETF with an expense ratio of close to 0 it is hard to beat and 75-80% of active fund managers can't/won't beat..... |
The liquidity really depends on the ETF though. There are a lot of smaller sector and specialized ETFs that aren't very liquid, and the reality is that this is where investment funds are most useful. Anyone can match the output of a Canadian Large Cap fund, but when you get to some specialized sectors where there are tiny little companies its very difficult without specialized knowledge and coverage.