Thursday, October 25, 2012

The Developing Problem with ETF's

Exchange traded funds have exploded to the investment scene over the last few years with many different sectors, types, and even volatility based ways to benefit from market trend changes.  The main issue is that many of the funds are becoming less liquid and in some cases are closing.

My concern is with a market crash, that the liquidity in these funds may dry up and become more difficult to sell in an extreme market event. Keep an eye on your ETF's and check the trading volume. Make sure it is active enough to provide liquidity for entry and exit points.

The market appears to be starting a major leg down, and liquidity will be important as this trend develops.