“Liquidity is not a big issue for me,” George Papadopoulos, a registered financial advisor, said in the article. “I tend to use just broad-based ETFs, such as total stock market, the S&P 500 and the Russell 2000. I don’t go to bed thinking if the Vanguard ETF I invested in yesterday will be liquid tomorrow. I sleep soundly.”
Papadopoulos, though, believes that understanding ETF liquidity is more important for advisors that are using ETFs as a tactical, short-term allocation.
With the ETF industry continuing to expand – the industry grew 27.3% in 2012 on record inflows of $184 billion, ETFs, along with all their quirks, will be too big to ignore. Cerulli estimates that advisors have about 7.1% allocated into ETFs and expects the number to rise to 7.8% in 2013, driven by low fees and growing popularity for passive investments.
“There’s no doubt that ETFs are growing in adoption and popularity, so to offer clients the right advice, financial advisors would be wise to educate themselves on all aspects of ETFs-liquidity and all,” Sean Walters, chief executive officer of the non-profit Investment Management Consultants Association, said.
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.