ETF Trading Best Practices

Molly Landes: ETFs (exchange-traded funds) are unique in their structure. While they are in many ways like a mutual fund, it's important to remember, from a trading perspective, the exchange-traded component of ETFs and that they trade on an exchange like a stock. To fully benefit from the trading flexibility inherent to an ETF, investors should consider these three best practices when it comes to trading ETFs. First, investors should always consider using limit orders instead of market orders when buying or selling an ETF. Limit orders allow the investor to buy a security at no more or to sell it at no less than the price specified in the order. This offers the investor greater control over the execution of the trade. Second, seek to avoid trading at either the market open or close. Bid/ask spreads tend to be at their widest during the beginning and closing of the trading session across asset classes. Tighter spreads may help improve price efficiency, which can reduce the cost of entering or exiting a position. And finally, for larger orders, consider market not held, which gives instruction to a broker to buy or sell a security at the best possible price. Or you can reach out to the ETF issuer, like Allspring or your brokerage firm, for guidance. ETF issuers and brokerage firms have relationships with liquidity providers who can help facilitate larger trades and provide additional sources of liquidity. Following this simple but effective guidance can go a long way towards having a positive experience when buying and selling ETFs. I hope you found this video helpful and now have a better understanding of some best practices when trading ETFs. And remember, the Allspring Capital Markets team is available to have trading and liquidity discussions at any time. We're here to help.