This liquidity concern makes sense when we think about trading stocks. A stock which is thinly traded will be much less liquid than a large cap, blue chip stock. Therefore, the less liquid stock could be difficult to sell if there is not demand for it. However, ETFs work differently than stocks in this way. The true liquidity of an ETF has three layers. In fact, most volume data available to investors online is only showing the tip of the liquidity iceberg.
Because of these three layers of liquidity, an ETF can sometimes be more liquid than its underlying holdings. We typically see this in less liquid asset classes such as preferred shares and fixed income, where the ETF will be easier to trade than the underlying holdings.
Therefore, the increased liquidity is just another of the many benefits of using ETFs in your portfolio! Therefore, look to get quotes and volume stats from sites with more robust data sets such as quotemedia. Exchange traded funds are not guaranteed, their values change frequently and past performance may not be repeated. BMO ETFs trade like stocks, fluctuate in market value and may trade at a discount to their net asset value, which may increase the risk of loss. More recently, Danielle is focusing her time on investors to provide ETF insights and education.
Danielle has an honors degree from Western University. In his role as portfolio manager and trader, Matt, and his team, are responsible for all segments of the fixed income market, both in Canada and internationally. Matt has over a decade of industry experience in managing and trading Canadian federal, provincial, corporate and real return bonds; US Treasury and corporate bonds, both investment grade and high yield cash bonds and CDX ; as well as, emerging market debt.
Matt has spent his entire career at BMO joining the bank in Pat Bolland has been in the investment industry for more than 4 decades. Over a decade he progressed through retail and institutional sales to help take MYW to a leadership position on Bay Street.
