Since not all stocks open for trading at the exact second the markets open, ETF investors should wait five or ten minutes after the open to begin trading. ETFs track a basket of securities, and if the underlying securities are not trading, it becomes difficult to effectively calculate an ETF’s price.
“Placing your trade after all stocks have begun trading for the day can mean more accurate ETF pricing,” Ross said.
ETFs track a number of markets, including international stocks. However, these foreign markets may not be open during U.S. market hours. Consequently, ETF investors seeking international exposure will likely get their most accurate price to NAV trading when the foreign and U.S. market hours line up.
Lastly, large traders dealing in big block orders may consider consulting with a specialized liquidity provider whom benefits from an Authorized Participant contact to execute ETF trades. APs keep trades fluid by creating and redeeming ETF shares in the primary market and help limit a large investor’s impact on an ETF’s price.
“If you make these trades on your own, especially if it’s a large trade of a thinly-traded ETF, you could pay more for execution,” Ross added.
For more information on ETFs, visit our ETF 101 category.