ETF’s Buying Power and its Effects on the Market

Although last year, MarketWatch, reported that the Bank of America was warning against the rise of ETFs and their distortion of the stock market, the general consensus is that they are only a small part of the broader market. In comparison to other securities, ETFs are not as large and so, many experts are less concerned.

Furthermore, their inherent diversification, and ability to diminish risk means that it can be a good choice for those wishing to invest in a more stable asset.

Tyler Mordy on ETF’s Influence on The Market

Do ETF have an influence on the market when they buy large blocks? They are not very large in relation to other securities. They basically trade on the secondary market. ETFs offer transcended liquidity according to a friend of him. When the underlying went no bid, the ETF continued to trade providing price discovery. Don’t trade at the end of the trading session, don’t use market order, a few simple rules could help you overcome the criticism found in popular media. 

ETFs are not that large in compare to other securities, and they offer diversity and transcendent liquidity