Nevertheless, there are still some important points to consider when executing a trade. For instance, if an investor uses a trading desk for large trades, they may receive more efficient pricing because the trading desks have access to more avenues for liquidity, including trading that occurs over-the-counter.
“Thus, the perception that it’s too risky to buy newly issued ETF may be naive. Of course due diligence is required for any ETF to understand who stands behind the investment and whether the sponsor has the experience and relationships to provide adequate liquidity,” VictoryShares added.
Investor should also keep in mind other best practices for ETF trades such as when to execute orders. ETF spreads tend to be wider during the opening of the exchange, and under normal market conditions, ETF spreads will typically tighten after the first 30 minutes of trading. Additionally, investors should keep market orders for smaller traders because they only access on-screen liquidity and stick to limit orders to better control larger trades.
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