However, it should be noted that limit orders typically cost more than market orders, but this is just the added price to pay for peace of mind. Additionally, if the specified price is not met, the order may never be filed.

Furthermore, we maintain a stop-loss order on all our ETF holdings. A stop-loss order helps limit potential losses on any position. For instance, we have an 8% stop loss on ETF trades, so that if a fund drops 8%, the brokerage will know to sell the investment. By holding a stop-loss order, investors will be able to adhere to a strategy to mitigate potential losses down the line, instead of letting emotions dictate when to sell. [An ETF Trend-Following Plan for All Seasons]

For past stories in this series, visit our “What is an ETF?” category.

Max Chen contributed to this article.