top | item 42377405

(no title)

shred45 | 1 year ago

Thanks, regarding transaction fees, I was referring to slippage (should have said transaction cost). This depends a lot on your customers rebalancing settings, but it would be good to be able to compare that directly to VOO.

discuss

order

jjmaxwell4|1 year ago

Yeah it's an interesting point. Due to the redemption mechanism of ETFs, my understanding is that an ETF's bid-ask spread is basically the weighted average of the bid ask spread of it's underlying holdings. Which to answer your questions means that buying the individual stocks within an ETF would result in approximately the same slippage as buying the ETF itself.

"Bid/ask spreads of the underlying securities directly impact the costs to market makers to trade ETFs" from this .pdf: https://www.ssga.com/library-content/pdfs/etf/au/spdr-au-etf...

ajoseps|1 year ago

This is definitely not true in practice except for maybe highly liquid ETFs and underliers