In a quest for lower cost and transparency, investors have flocked to buying and trading Exchange-Traded funds commonly known as ETFs.
Many investors do not know the perils of investing or trading in ETFs. One example is ETF’s objective may be to invest in large cap domestic stocks, but the ETF itself may be small and the result can be wide spreads, especially during market volatility. As of January 31, 2010, 15% of all ETFs had market caps of less than $10 million dollars. Illiquidity could be complicated by an ETF’s objective to invest in niche or less liquid markets.
ETF’s are a wonderful investment tool if used correctly. The ETF market will continue to grow. Buyer beware.
Peter Miralles, CFP® CIMA® CLU
*This article is provided for informational purposes only and should not be construed as individualized investment advice. Please contact Atlanta Wealth Consultants for more information.
