For this week’s episode of ETF 360, ETF Trends CEO Tom Lydon and CIO Dave Nadig caught up with Janel Jackson, Head of U.S. ETF Capital Markets at Vanguard, to discuss capital markets and the opportunities investors might be missing out on.
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Looking at the market currently, particularly concerning volatility in single stocks, Jackson notes how it’s been an interesting observatory period. With that in mind, while used to a retail market base of investors, the thought is currently focused on long-term, broad-based, diversified products over chasing single stocks.
Jackson notes, “Something that we have noticed in our lineup is the shift from these large cap growth tech companies that were doing really well last year, to some of the more beaten down value names that have done really well year-to-date. That exposure we’ve seen clients gain through our Small Cap S&P 600 Value ETF (VIOV). So, kind of a shift in the regime, as you think about style tilts in portfolios, moving from growth to value.”
As far as tips for the average advisor looking to get their client’s money to work, Jackson explains how ETF trading practices are easily a highlight worth talking about. One of the things to be mindful of is selecting the order type. Vanguard recommends that investors utilize marketable limit orders, so investors have more control over where that order will be executed. As has been observed, market order can help when it comes to volatility or trading imbalance, allowing a large order to move through and find many smaller trades to go with it, which could lead to some poor trades.
Jackson continues, “Something else we like to guide our clients and advisors on is the time of day that they’re trading. This means staying away from the auctions if possible, more so the open than the close.”
Trading At The Right Time
With the open, there’s a price discovery process going on in all of the underlying securities that are in the ETF. Trading into the close is less traditional, and Vanguard advises investors to be thoughtful when trading at that point. Trading in size, in particular, could lead to imbalance. Even with small trades, unintended things may get caught up in the auctions, so it’s important to keep a clear head when trading at close.
When trying to put a large amount of money at work, Jackson explains how the capital markets really come into play when helping to support clients with large transactions. Vanguard will determine what type of trade should be used in this scenario and provide that information, along with various proprietary tools, to analyze a trade best before it goes off.
Jackson makes it clear, “One of the benefits of working with the capital markets desk is that we have lots of connections to the street, and we know who the most active participants are in our products, so that we can direct you to the right place, and you get the best pricing and the best execution for the clients.”
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