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Investment Q&A

Not investment advice or solicitation to buy/sell securities. Do your own due diligence and/or consult an advisor.

Q: I read on the FAQ's of an ETF Website the following question:
"Are an ETF's Assets Under Management and Trading Volume good indicators of liquidity".
The answer they gave was: "No. The most important aspect related to the liquidity of any ETF is that while the liquidity of the ETF itself (the ETF’s own trading volume on the exchange) may be deemed poor or limited, the key gauge of that ETF’s liquidity is the liquidity of its underlying exposure.
With the mechanism of creation and redemption of ETFs, a designated broker (DB) is responsible for ensuring that market prices track the ETFs’ net asset value (NAVs). If the underlying securities can be easily bought and sold, a tight fit between price and NAV is easily maintained.
Hence, an ETF with small AUM and little trading volume can still be highly liquid if its underlying basket of securities is liquid."
Is this essentially correct, and if it is I'm still not sure how this would work? I have avoided many ETF's for what appears to be poor liquidity and trading volume. If I want to sell an ETF and level 2 quotes show a large spread to sell for example 1000 shares, will additional shares in the ETF somehow be created to get a fair market price based on the underlying stocks held in that ETF if I put a Sell order in on what appears to be a low volume ETF? What I am getting at basically is - is there any way of knowing what the price spread will be on the sale if additional ETF units that are created "on the fly" by the DB? I may not be interpreting the answer given above so please try to expand and clarify their explanation.
Thank you.
Read Answer Asked by Alan on February 27, 2017
Q: What is your opinion of adding VVL & VMO in equal weight for a global value/ momentum strategy to my portfolio? Or adding just VVL... also could you comment on currency risk here since these products are not hedged to CAD.
Thank you.
Read Answer Asked by Kyle on February 24, 2017
Q: COULD YOU TELL ME YOUR VIEW REGARDING THOSE ETF, FOR AN INCOME PORTFOLIO.(CBO - XBB - BXF )
THANK YOU.
P.
Read Answer Asked by pascal on February 24, 2017
Q: Hi,
I have these 4 in my RRSP and have about $26,000 in cash to invest there. What would you suggest for this money and would you suggest changing of any my current holdings. Looking at a 5 year hold. Thank you.
Read Answer Asked by Alan on February 24, 2017
Q: Hi, would you still consider Cdz to be your favourite Canadian ETF for a person seeking a 4% dividend and a little stability, for the next 5+ years. I got full positions in financial,Heath and Tech. stock. The rest of the sectors about 1/2 to 3/4 position.
Or would you consider a different ETF. Would like to stay in Canada
Thanks,Brad
Read Answer Asked by Brad on February 22, 2017
Q: My daughter would like to invest in something Robotics related in her RRSP...thinking long term. Would ATA be a good offering even though it is near a high?
Any other ideas? Would XIT be too broad?
Much appreciated, Paul
Read Answer Asked by Paul on February 21, 2017