Author Topic: Safe to invest in ETF on exchange with low trading activity?  (Read 1570 times)

samuck

  • 5 O'Clock Shadow
  • *
  • Posts: 52
Safe to invest in ETF on exchange with low trading activity?
« on: August 10, 2014, 09:03:23 AM »
Hello everyone
After going through many threads of this forum, I've decided to join the passive investor crowd and make VWRL (Vanguard FTSE All World) the main pillar of my investment portfolio. I've started to trade this ETF through Postfinance on the SIX Swiss Exchange (live in Switzerland) with monthly investments. However, it seems to me that trading activity is rather low. For instance, on Friday last week, there were 4 trading events and I believe there were also days with no activity at all. Here's my question: Is that a risk for me? Do I run the risk of not being able to sell the ETF when I want to, or at a significantly lower price? Should I change to another broker that let's me trade on another exchange? Thanks for your advice!

beltim

  • Magnum Stache
  • ******
  • Posts: 2964
Re: Safe to invest in ETF on exchange with low trading activity?
« Reply #1 on: August 10, 2014, 10:01:24 AM »
Is it a risk?  Yes.  Is it a significant risk?  That depends on the variables.  At http://www.six-swiss-exchange.com/funds/security_info_en.html?id=IE00B3RBWM25CHF4 you can find not only the previous days trading activity but also average trading activity: in this case, perhaps 11,000 shares.  Usually the problem with thinly traded issues is a large bid/ask spread, but there isn't a large spread here: just 0.11CHF between the bid and ask.  I'd use limit orders instead of a market order to make sure you don't pay too much or sell for too little, but I think it's fine.

hodedofome

  • Handlebar Stache
  • *****
  • Posts: 1314
  • Age: 40
  • Location: Texas
Re: Safe to invest in ETF on exchange with low trading activity?
« Reply #2 on: August 11, 2014, 10:26:57 AM »
As long as there's a market maker supporting the ETF it 'should' be ok.

samuck

  • 5 O'Clock Shadow
  • *
  • Posts: 52
Re: Safe to invest in ETF on exchange with low trading activity?
« Reply #3 on: August 16, 2014, 12:55:03 AM »
Thank you, your replies are very helpful and reassuring. And with my long-term perspective, I think I can also take a little spread. Vanguard, here I come! ;-)