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You are leaving SSGA.com
The website you are accessing is created and maintained by another entity. We make no representation or warranty with respect to the information contained on the site or that it is appropriate in all jurisdictions or countries, or for use by all investors or counterparties. The products and services discussed at this site may not be appropriate for sale or use by all investors or counterparties. By providing this link, we are not providing you with investment advice or offering securities for sale to you. All persons and entities that access this site do so on their own initiative and are responsible for compliance with applicable local laws and regulations.
You are leaving SSGA.com
The website you are accessing is created and maintained by another entity. We make no representation or warranty with respect to the information contained on the site or that it is appropriate in all jurisdictions or countries, or for use by all investors or counterparties. The products and services discussed at this site may not be appropriate for sale or use by all investors or counterparties. By providing this link, we are not providing you with investment advice or offering securities for sale to you. All persons and entities that access this site do so on their own initiative and are responsible for compliance with applicable local laws and regulations.
Debunking Myths About ETF Liquidity
Say What?
We took a look at three common misconceptions that can contribute to increased costs. Explore each of them to find out more.
Myth: ETFs with the lowest expense ratios have the lowest total costs
Fact: Look Beyond the Expense Ratio
An ETF's expense ratio and trading costs are not correlated —so a low-fee fund may not have the lowest total cost of ownership (TCO).
To calculate an ETF's cost, a combination of technical and strategy-specific factors come into play:
- Bid-ask spreads
- Rebalance frequency
- Rebalance size
Learn how to account for the true costs of owning an ETF before you make your next trading decision.
Myth: A single metric is all you need to gauge an ETF’s liquidity
Fact: Get the Complete Liquidity Picture
Investors often use point-in-time statistics like 30-day average trading volume to analyze an ETF's liquidity.
But a fund's liquidity profile can change in different markets. Your ETF due diligence should:
- Look beyond on-screen liquidity
- Analyze bid-ask spreads over various time periods, times of day and market environments
- Evaluate the fund's profile, from daily trading volume to assets under management
Get the roadmap for navigating the twists and turns of an ETF's liquidity dynamics.
Myth: All ETF trade execution is the same
Fact: Choose the Right Execution Strategy
ETF investors can choose from a variety of execution strategies to control cost.
Because ETFs trade on an exchange with primary and secondary market liquidity, you have the flexibility to choose:
- Order type, such as market or limit
- Order execution, with help from institutional trading desks or authorized participants
Learn how to more effectively execute your ETF trades.
Access Additional Resources
Why Liquidity Matters
Learn the importance of factoring liquidity into your ETF due diligence.
Evaluate Total Cost of Ownership
Look beyond the expense ratio and consider trading costs to get the lowest TCO.
Liquidity Insights
See all of our liquidity resources to find answers to your liquidity questions.