Rather than focusing solely on trading volumes, says Zach Hascoe, investors and their advisers should look for ETF products that provide strategic and investment opportunities for their portfolios
Liquidity is one of the most misunderstood terms in the exchange-traded fund (ETF) world. So what is it really? In general, it is defined as the ability to quickly convert an investment into cash with as little transaction cost or ‘friction' as possible. Intra-day liquidity is one of the most important factors separating mutual funds from ETFs. And because ETFs, like stocks, are traded on exchange, investors often equate volume with liquidity. This would be a mistake. The liquidity of an ETF is not defined by the volume it trades on a given day and is not indicative of the potential futu...
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