Author Topic: What is the process most ETF investors use for their routine buy orders?  (Read 408 times)

Fields of Gold

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Re:  regular monthly investment on the first/last market day of month to save for retirement,  (not day-trading)

With mutual funds like VTSAX (Total Market Index), the investor can place a buy order late at night and it transacts on the closing NAV of the next market day.  The investor could also set-up automatic investment orders occuring each month and not look at the market.

For investors who opt for the ETF of Total Market Index (VTI) and other ETFs, when/how do most place their monthly orders?  Do they wait until the market opens and use a market order for whatever the price happens to be?   Or do most watch the market movement for a little while and try for a better price with a limit order?
« Last Edit: November 03, 2018, 04:38:30 PM by Fields of Gold »

YttriumNitrate

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Re: What is the process most ETF investors use for their routine buy orders?
« Reply #1 on: November 03, 2018, 05:34:41 PM »
I just do limit orders during normal trading hours and set the price to the last traded bid. Sometimes I forget to put in the order and then do a double (or triple) sized order when I finally remember. I expect the Dow to be above 100,000 when I start selling, so I try not to worry too much about the intraday (or even intermonth) movement.

MustacheAndaHalf

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Re: What is the process most ETF investors use for their routine buy orders?
« Reply #2 on: November 04, 2018, 09:16:20 AM »
I don't use limit orders for two reasons.  First, the market tends to move upwards, so most of the time if you wait you get to watch the market move higher and higher.  Second, if you're worried about bid-ask spreads, VTI is one of the most traded ETFs in the world, and it's bid-ask spread is typically $0.01.  The big, diverse ETFs typically aren't taking too much in the bid-ask spread, which some people try to control with limit orders.

I prefer logging in during market hours and issuing market orders.

flipboard

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Re: What is the process most ETF investors use for their routine buy orders?
« Reply #3 on: November 04, 2018, 09:37:10 AM »
I don't use limit orders for two reasons.  First, the market tends to move upwards, so most of the time if you wait you get to watch the market move higher and higher.  Second, if you're worried about bid-ask spreads, VTI is one of the most traded ETFs in the world, and it's bid-ask spread is typically $0.01.  The big, diverse ETFs typically aren't taking too much in the bid-ask spread, which some people try to control with limit orders.

I prefer logging in during market hours and issuing market orders.
IME ETF's go both up and down while I'm buying.

I likewise buy in the middle-ish of the trading day (which corresponds to my evening, which is convenient), but still use limit orders just in case something really weird happens.

markbike528CBX

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Re: What is the process most ETF investors use for their routine buy orders?
« Reply #4 on: November 04, 2018, 10:15:36 AM »
Caveat: I'm not a typical ETF investor (only have 2 or 3 positions).

If I want to buy an ETF, I'll sell a cash-covered put at the price I'd pay for a normal long position.

If the put is not assigned, than I get to keep the (premium-commission) and I've had my useless cash working. 
Rinse and repeat.  Roth IRA only (for capital gains reasons).
I usually go for a expiration date fairly far, like several months in the future to ensure a higher put premium.

If the put is assigned, I get the ETF at the price I was willing to pay in the first place, and have my cost basis reduced by the (premium-commission).
This helps to offset the loss of the difference between the strike price I paid and the current market price when assigned.

Slightly complicated, but it does get me to a)get use of rotting cash, b)pull the trigger on a buy and stick with it.

Rob_bob

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Re: What is the process most ETF investors use for their routine buy orders?
« Reply #5 on: November 04, 2018, 09:40:40 PM »
I don't use limit orders for two reasons.  First, the market tends to move upwards, so most of the time if you wait you get to watch the market move higher and higher.  Second, if you're worried about bid-ask spreads, VTI is one of the most traded ETFs in the world, and it's bid-ask spread is typically $0.01.  The big, diverse ETFs typically aren't taking too much in the bid-ask spread, which some people try to control with limit orders.

I prefer logging in during market hours and issuing market orders.

I use limit orders, I put in a price slightly higher than the last trade, as high as I'm willing to pay.  The broker is required to get you the best price, not buy it for your max bid.  If you really want to buy something does paying $0.20 more really matter over a 10 year time span?

If you use a market order you will pay whatever the current price is, and if something suddenly spikes up you could find yourself paying much more than you intended only to see the price drop back down later in the day.

I can't see any reason to use a market order but each to their own.

MustacheAndaHalf

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Re: What is the process most ETF investors use for their routine buy orders?
« Reply #6 on: November 05, 2018, 07:53:12 AM »
I'm talking about broad market ETFs, like VTI or VXUS.  Do others buy diversified ETFs like these, or is it more lightly traded ETFs?  With more volatile stocks, I can see how the price might spike where in a broad market ETF it wouldn't.  Also if no sellers can be found, the price can spike.  That lack of liquidity seems more common for a less traded ETF, but not for the largest ETFs.

Rob_bob

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Re: What is the process most ETF investors use for their routine buy orders?
« Reply #7 on: November 05, 2018, 04:56:35 PM »
Well I have ETF's that have heavy volume, and the NTF funds at TDAmeritrade that I use generally have low volume.  I don't trade in large enough blocks to make a dent in the price swings and never have a problem with orders being filled.  I just set my price for what I'm willing to pay or receive.  I used to nickle and dime the price and missed out before.  Then I realized it was silly to be that tight on long term investments.

My limit trades always execute at the current trading range not at the price I may enter, but I will never get an unpleasant surprise like I might get, even if unlikely, with a market order.