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ETFs 114: Exchange-Traded Fund Best Practices

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1.
Why are limit-orders the most effective type of orders to use with exchange-traded funds?
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They allow patient investors to receive the price they want. Limit orders give investors the greatest amount of flexibility in filling at the price the desire, if they are patient.
2.
What does the intraday indicative value index show investors about exchange-traded funds?
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What the net asset value of the underlying holdings is worth at any given time. The IIV is an important tool for determining what an ETF is worth at any point.
3.
Bid-ask spreads on exchange-traded funds tend to be widest near _______.
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Market-open.
4.
Which practice DOES NOT stand to minimize costs when trading exchange-traded funds?
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Using market orders. High liquidity and trading near the middle of the day allow investors to capitalize on the thinnest bid/ask spreads, which minimizes costs.
5.
Which type of order will sell a position at a specified price only once a predetermined limit (stop) has been triggered?
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Stop-limit. A stop-limit order becomes a limit order once a stop has been triggered.