Related: Moving Beyond Cap-Weighted Investing for Today’s Volatile Market
Johnson also advised ETF investors to not trade during the open or close of a normal trading day due to the wider spreads since it takes a moment for the markets to “wake up” at the beginning and more traders step back from the markets near the close.
“In light of these considerations, it makes sense to wait about 30 minutes after the opening bell to trade an ETF and to avoid trading during the half hour leading into the market’s close,” Johnson said.
Investors who are executing large trade orders may think about talking to a professional to help efficiently push it through. Johnson describes large orders as anything that accounts for 20% of an ETF’s average daily volume or more than 1% of total assets under management. A large investor may save on execution cost by talking to the ETF provider’s capital markets team or a market maker so as to execute a large trade without negatively impacting the market price.
For more information on investing in ETFs, visit our ETF 101 category.