![]() ![]() This is due to the capital markets tools available to the market-making authorized participants who have an incentive to ensure the ETF’s price and underlying net asset value do not diverge. Trading ETFs have proven to be more efficient and more liquid than trading their underlying baskets.If the underlying securities do not trade, then it will be difficult to get a true underlying mark for the ETF (that is why you don’t want to trade ETFs using market orders, especially in the morning). ![]() ![]() What about the disruptions ETFs experienced during the August 24 sell-off? This was due to the fact that many of the underlying stocks did not trade that morning rather than some structural defect of ETFs.ETF product innovation has democratized retail investing by giving exposures to retail investors that had been historically only available to institutional and professional investors.3D Asset Management prefers exchange-traded funds (ETFs) because they are 1) cost-effective, 2) tax-efficient, and 3) more transparent than other publicly-traded vehicles, such as open-ended mutual funds. ![]()
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