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ETF Minimum Requirements
Old 01-10-2011, 12:53 AM   #1
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ETF Minimum Requirements

I am planning on investing in ETFs. I am going to do research on specific ones, but are there any minimum requirements that an ETF should have, such as a certain value of assets, trading volume, a measure of liquidity, etc, that I should keep in mind? I do plan on looking at the expense ratios. thx!
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Old 01-10-2011, 05:32 AM   #2
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I am planning on investing in ETFs. I am going to do research on specific ones, but are there any minimum requirements that an ETF should have, such as a certain value of assets, trading volume, a measure of liquidity, etc, that I should keep in mind? I do plan on looking at the expense ratios. thx!
don't know if anyone can give you an exact number

but I would certainly run a screen and look at some break downs like top 20% in volume and assets

there would have to be a very compelling reason for me to be in an ETF that is not highly active
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Old 01-10-2011, 06:06 AM   #3
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ETF criteria are rather simple for me.

First, the ETF must be found on the asset class lists at DFA vs. Vanguard or be a total market ETF like VEU or VXUS.

Second, the average daily volume must be at least $5 million worth or 100,000 shares.

That's it.
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Old 01-10-2011, 07:25 AM   #4
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If you never want to sell an ETF, would average daily volume matter? As long as it pays its dividends. I suppose that the market value of an ETF is technically independent of its component stocks, but the market price ought to have something to do with the dividends, just as it does with stocks.
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Old 01-10-2011, 07:41 AM   #5
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The simple answer is yes, average daily volume matters. It is a proxy for the popularity of the ETF and the number of buyers and sellers. You do not want your ETF to become like a house in a bad neighborhood that you never want to sell. The volume also affects the bid/ask spread which affects your fees on initial purchase, re-invested dividends, and any tax-loss harvesting moves you may wish to make.

Also it ain't the high-volume ETFs that are discontinued by their sponsors.
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Old 01-10-2011, 08:03 AM   #6
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Also it ain't the high-volume ETFs that are discontinued by their sponsors.
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