FUEGO
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Nov 13, 2007
- Messages
- 7,746
Like many of you, I have a significant portion of my portfolio in exchange traded funds. They are a low cost easy way to own certain categories in my target asset allocation.
But as I buy more ETFs, I am wondering what I should be looking for to make sure I am not paying for more than what I get.
Here is what I look for when selecting a particular ETF that fits in my asset class allocation:
- expense ratio
- average volume
- average bid/ask spread
- turnover ratio
- average discount/premium to NAV
Ideally I want a highly liquid, frequently traded ETF that produces the benefits of low bid/ask spreads and minimal prem/disc to NAV.
After all, it is silly for me to move from a mutual fund with a 0.20% expense ratio to an ETF with a 0.12% ER but pay a 1% premium to NAV in the process (thereby eating up 12 years of the benefit of lower expenses!).
After I have selected one or more ETFs that are optimal (in general), I typically pick the best one based on the current bid/ask spread and discount/prem to NAV.
I know of a few places to see historically what the average disc/prem to NAV is, but what is the best way to see intra-day NAV and compare to current bid/ask prices? Fidelity is the broker I use to buy ETFs, and they have a decent "research" feature that shows real time intra-day NAVs along with current real time quotes. Is this the best way to get real time info on prem/disc to NAV? What are others doing?
This isn't a huge deal if one is buying a couple thousand dollars worth of ETFs, but if I move a big chunk of funds from one ETF or a mutual fund to another ETF, I could be losing many hundreds or thousands by paying an extra 1+% premium to NAV (or selling at a 1+% discount to NAV).
What else are others looking at to make sure you get a good deal on an ETF transaction?
But as I buy more ETFs, I am wondering what I should be looking for to make sure I am not paying for more than what I get.
Here is what I look for when selecting a particular ETF that fits in my asset class allocation:
- expense ratio
- average volume
- average bid/ask spread
- turnover ratio
- average discount/premium to NAV
Ideally I want a highly liquid, frequently traded ETF that produces the benefits of low bid/ask spreads and minimal prem/disc to NAV.
After all, it is silly for me to move from a mutual fund with a 0.20% expense ratio to an ETF with a 0.12% ER but pay a 1% premium to NAV in the process (thereby eating up 12 years of the benefit of lower expenses!).
After I have selected one or more ETFs that are optimal (in general), I typically pick the best one based on the current bid/ask spread and discount/prem to NAV.
I know of a few places to see historically what the average disc/prem to NAV is, but what is the best way to see intra-day NAV and compare to current bid/ask prices? Fidelity is the broker I use to buy ETFs, and they have a decent "research" feature that shows real time intra-day NAVs along with current real time quotes. Is this the best way to get real time info on prem/disc to NAV? What are others doing?
This isn't a huge deal if one is buying a couple thousand dollars worth of ETFs, but if I move a big chunk of funds from one ETF or a mutual fund to another ETF, I could be losing many hundreds or thousands by paying an extra 1+% premium to NAV (or selling at a 1+% discount to NAV).
What else are others looking at to make sure you get a good deal on an ETF transaction?