I don't think I'll be using ETFs after all.

[LOL!]

Back in 2010 I purchased an ETF at 10% lower than the opening price and it closed well up.

I would not leave any standing limit orders hanging order. Instead, I would just have an alert sent to my smart phone, so that I could make a decision depending on the actual circumstances. Of course, you need a broker that still works during these kinds of things.

 

[OrcasIslandBound]

I prefer ETFs to mutual funds, usually, because I feel more comfortable knowing that I can buy or sell them in milliseconds rather then placing an order and being vulnerable to market swings that might occur during the whole day while waiting for the transaction to be completed.

I do still own some mutual funds that aren't available as ETFs.

On an added note, I trade less than once or twice a year. So, I would probably be just fine with mutual funds also.

 

[Mulligan]

Another book on HFT that came out before The Flash Boys is Scott Patterson's "Dark Pools". HFTtraders ply the dark pools, too. I think Schwab, TDAmeritrade, and Fidelity have such pools.

Most orders of more than 100 to 200 shares get split into smaller orders automatically nowadays because folks know that these HFT folks will jump on larger orders. If your broker is not doing that for your large orders, then you might wish to consider a different broker.

And price improvement should be routine at one's broker. The reasons is that all brokers get paid a rebate by the exchange for sending their orders to the exchange. Your broker should give you some of that rebate and not keep it in their own pocket.

I have noticed that before and didn't quite know the reason. I mostly buy and sell issues that only trade a few times a day so I can follow Level 2 pretty easy. I have seen them change a sell order of mine on the screen from 500 down to 100 before. And sometimes they flat out don't even show at all a buy or sell from me on the level 2 screen.


Sent from my iPad using Tapatalk

 

[Lsbcal]

I've decided to go back to mutual funds from ETF's. The reasons:

1) Vanguard has changed its frequent trading policy to allow one back into a fund if more then 30 days have past after you've sold it. Was 60 days or you would have to use the mail.

2) One can go from ETF's to funds in the same day. Used to take 3 trading days. This is due to VG's new accounts which combine VG funds and ETF's.

3) Fund ER's are now the same as ETF ER's, e.g. .09% for VTV or VVIAX (large value fund).

4) I can better do a sell then buy at the day close without be concerned about bid-ask spreads and market moves between the sell and buy in ETF's.

5) I have to admit that the mutual fund feels a little safer but VG ETF's are probably just as safe.

 

[Options]

Here's Jack Bogle on ETF's:

Jack Bogle: Trump Is Wrong, ETFs Are Bogus and Foreign Investing Is Useless - TheStreet

Specifically:

Exchange-traded funds are overrated and in some cases flat-out dangerous, Bogle said.

"ETFs have become the new way to speculate," he declared, even though many ETFs are in fact index-based. But Bogle said that ETFs often focus on narrow sub-sectors. "There's a lot of niche-seeking," he noted, with new ETFs debuting what seems like every day. "There's a lot of junk out there."

When he ran Vanguard, Bogle even rejected the idea of ETFs when they were proposed in the early 1990s. Eventually, State Street (STT - Get Report) debuted its ETFs, a whole new type of security that basically allowed mutual funds to be continually traded on exchanges during the trading day. (Vanguard did eventually follow with a large number of ETF asset classes for its funds.)

"A lot of people will say that shows how stupid I am," Bogle remarked about his decision to pass on ETFs, but "I have no regrets about it."

"Exchange-trade funds are fine, just so long as you don't trade them," Bogle said. If you buy them, hold them for the Warren Buffett-endorsed term: forever.

 

[jim584672]

Seems like he is confusing the topic. He asserts trading is the great evil and then goes on to put down ETFs because they are easier to trade. He is missing the point. Conventional open ended funds are trade-able as well. The vehicle is not to blame.

Not everyone buys into Bogle's buy and hold forever mantra. ETFs grew as an answer to the disadvantages of conventional open ended and closed ended funds.

 

[NW-Bound]

While I have quite a bit of individual stocks, I use ETFs when I want to make small investments in some specific sectors and do not have enough committed to multiple companies to achieve diversification.

I prefer ETFs over MFs because I can occasionally take advantage of a low point during the trading days. Also, with ETFs I often squeeze some additional returns with writing covered call options, and this is not possible with MFs.

 

[NW-Bound]

Seems like he is confusing the topic. He asserts trading is the great evil and then goes on to put down ETFs because they are easier to trade. He is missing the point. Conventional open ended funds are trade-able as well. The vehicle is not to blame.

Yes, blame the gun owners, not the guns.

 

[Options]

Seems like he is confusing the topic....

Oh is he? Research has shown that a very high percentage of ETF's are traded, much more so than other investments (like mutual funds). What Bogle is "against" is using ETF's to mimic mutual funds and then trading them like stocks. FWIW, the financial industry was not at all happy with his assessment and came out with guns blazing (see Financial Times for the reaction).

Bogle, and too many others to list here, are against adding unnecessary complexity to a PF. Here's Rick Ferri on ETF's:

"If you plan on making a single, large, lump-sum investment, then paying one commission to buy ETF shares makes sense. -- But if you are like most people and invest regular sums of money, you may actually spend more on commissions than you would save on ETF management fees and taxes."

"It is prudent to dig deep into the indexing methodology so that you can make an informed investment decision about the ETFs you are interested in."

"Rules for index construction have stretched from the simple and elegant to the complex and cumbersome."

"The important matter for ETF investors is how the index is managed and the characteristics of the index."

Emphasis added

 

[audreyh1]

I've decided to go back to mutual funds from ETF's. The reasons:

1) Vanguard has changed its frequent trading policy to allow one back into a fund if more then 30 days have past after you've sold it. Was 60 days or you would have to use the mail.

2) One can go from ETF's to funds in the same day. Used to take 3 trading days. This is due to VG's new accounts which combine VG funds and ETF's.

3) Fund ER's are now the same as ETF ER's, e.g. .09% for VTV or VVIAX (large value fund).

4) I can better do a sell then buy at the day close without be concerned about bid-ask spreads and market moves between the sell and buy in ETF's.

5) I have to admit that the mutual fund feels a little safer but VG ETF's are probably just as safe.

Interesting! Some of the things my list.

Fidelity allows same day exchange of Fidelity funds, and only 1 day is needed for non-Fidelity funds.

Fidelity enforces short-term trading on mutual funds by charging a % fee if held for too short a period. The time period depends on the fund. Beyond that I think they mainly pay attention to round-trip trades - buy then sell - less than 30 days.

I confess I haven't completely given up. I do have likely one candidate - SCHD, that I may use when I get around to selling any of my two remaining dividend paying stocks that I have owned for decades. I'll use the limit order tips provided here to handle the bid/ask spread and let the brokerage break it up into pieces to foil those evil HFTs!

 

[HFWR]

Pretty much all ETFs here.

 

[papadad111]

All ETFs No reason other than convenience and at the time lower expense versus MF

Had a horrible experience with fidelity once. Turned me off of the MF experience and I can buy the same MF in ETF format ....

A question: The systemic ETF risk that is discussed really seems to be sector specific and the leveraged types of ETFs...not the broad market stuff like VTI. VXUS. SPY QQQQ. Etc. Does everyone concur ?

 

[Lsbcal]

...

A question: The systemic ETF risk that is discussed really seems to be sector specific and the leveraged types of ETFs...not the broad market stuff like VTI. VXUS. SPY QQQQ. Etc. Does everyone concur ?

My guess is yes you are right. I've never asked Vanguard whether their ETF's are in some way secured by the existence of almost identical funds. Of course, if the ETF price was different then the fund price, arbitrage should correct this. VG offers fund to ETF conversion but not the other way.

It is only when we have a crisis of confidence and stocks are cratering that these concerns come forward ... especially at night.

 

[Sunset]

.....A question: The systemic ETF risk that is discussed really seems to be sector specific and the leveraged types of ETFs...not the broad market stuff like VTI. VXUS. SPY QQQQ. Etc. Does everyone concur ?

That is how I understand it.

 

[jim584672]

My guess is yes you are right. I've never asked Vanguard whether their ETF's are in some way secured by the existence of almost identical funds. Of course, if the ETF price was different then the fund price, arbitrage should correct this. VG offers fund to ETF conversion but not the other way.

It is only when we have a crisis of confidence and stocks are cratering that these concerns come forward ... especially at night.

Only certain broker/dealers can purchase or redeem directly with Vanguard in a Creation Unit, which is 25,000 shares.

 

[Lsbcal]

Only certain broker/dealers can purchase or redeem directly with Vanguard in a Creation Unit, which is 25,000 shares.

Not sure what this shows. Want to expand on it?

 

[jim584672]

Not sure what this shows. Want to expand on it?

If you read the Prospectus it describes it. The price arbitrage between the ETF and the underlying stocks is possible because shares can be called or put to fund, but only via Creation Units.

 

[Lsbcal]

Thanks, creation units were always kind of mysterious to me. Does Vanguard get to create them or must it be non-VG? Does the arbitrage work during the trading period or only at the end of day? I guess to be really effective it should be intraday.

Orginally I think the intraday NAV was suppose to be available with a 20 minute delay. Yahoo used to have this denoted something like ETF.iov . But that seems to have never gotten off the ground. Vanguard used to provide the quote symbol but I could not actually use that symbol in the quote box. I was able to show a chart of the price versus NAV on Yahoo. But again that is current price versus 20 minute delay. If one can show that and pricing is quite stable then at least there is a feeling that the trade premium/discount is stable.

This then gets to suspicions about intraday pricing. Is it properly regulated? The premium/discount intraday is not apparently available. If one looks at a chart of ETF versus it's fund they overlap quite well. But that is a high level view and does not show intraday swings i.e. there is apparently no way to show the intraday swings in premium/discounts.

All this mystery makes me uncomfortable about ETF's although I've used them for some years. The more I write about my concerns, the more I feel funds are going to work better for my requirements.

 

[audreyh1]

Here is an example of the kind of shenanigans that make me nervous about ETFs.
Barclays Rigged Its OIL ETN By Limiting New Creation Units | Zero Hedge

 

[Lsbcal]

With all due respects, that Barclay ETN is not very representative of the broader ETF's that most individual investors should consider. Now if you fancy yourself a gunslinger then that is another story.

 

[hnzw_rui]

Personally, the thing I dislike most about ETFs is manually having to set-up orders for new contributions. Same for rebalancing.

It appears being hands off and just having recurring deposits/transfers to balanced funds is more conducive to my net worth than manually managing the portfolio.

 

[Sunset]

ETN's are not even ETF's.

Very different investments, an ETN is a really much more like a debt or bond and are backed only by the credit of the issuer.

It is not connected directly to actual stocks.

 

[NW-Bound]

To check an ETF for index mistracking, one can always plot it against the target index.

For the S&P 500, Vanguard's VOO and its much older brother SPDR SPY ("Spider") track the index fairly well.

I missed the S&P low point at 1814 last Wednesday (it's now 5% higher), so just set a March put option order to buy the index at an effective 6% off current value. Will see if that's going to hit. Can't play this kind of game with MFs.

PS. Yes, it hits. If the market drops 6%, I will be buying the S&P at even a lower point than last week. If it does not, I will be pocketing the option premium, which works out to 16% annual return on the cash that I set aside in case the option gets exercised.