ETFs vs Funds. Selling.

[Deleted User]

You still assume that there will always be buyers for the ETF index.
BTW this is the same as Investment Trusts. You are selling tens of stocks to the SAME buyer. Something about it just seems risky.

quirkydeptless

AnotherJoe wrote: »

:
When you buy or sell a fund it takes days

Does that depend on the broker?

When I buy or sell funds on H&L, it happens on the same day if I put the order in before 0730.

AnotherJoe

Not if its with WoodFord Equity Income


Being more serious, fair enough point, but if you put your order in after 10am you dont even know what price you'll get (buy or sell) till midday the next day. But I have to say my experience with HL and selling funds is it usually takes 2-3 days.

AnotherJoe

newbinvestor wrote: »

You still assume that there will always be buyers for the ETF index.

If there werent buyers for it, lets say index funds slowly declined out of favour, then the fund would gradually diminish in size and at a point where it becomes uneconomic it would be wound up or merged into another fund. This is not uncommon. And it happens, probably more frequently, with funds as well.

newbinvestor wrote: »

BTW this is the same as Investment Trusts. You are selling tens of stocks to the SAME buyer. Something about it just seems risky.

No you are not you are selling the index to someone who wants to buy the index in the same way you are selling the fund to someone who wants to buy the fund because they want either, say Terry Smiths knowledge or a fund that invests in European medium sized companies, or whatever.

Maybe this is the subtle distinction you've missed, that people are buying the index (or selling it)

Someone who wants to buy only (say) 90 specific funds out of 100 in an index, either wont buy the index or will buy it because the simplicity of buying one fund/ETF/IT outweighs teh (in your opinion) 10 rubbish stocks. Or if they want only to by 20 shares they wont buy the index, they will either buy those 20 shares or a fund that specialises in them.

This sort of distinction of omitting some companies shares from an index is course also being matched for common sets of shares people dont want via "ethical" or sustainable" or whatever type indexes as well. For example there is an index for the S&P500 without any oil or coal stocks. A couple of variants from what i recall.

newbinvestor wrote: »

Something about it just seems risky.

Thats probably because you havent understood what people have been saying and maybe still have not taken on board that when someone buys the S&P500 thats what they want to buy. The S&P500 asa job lot. They dont wish to discriminate amongst those 500 and buy say 300 and then another 200 elsewhere. If they wanted that they would buy a fund that did that sort of thing.And indeed there are funds like that as well, so-called "enhanced" index funds. \


Since you plainly dont understand (over three separate threads!) I suggest you just buy a fund that follows the index, assuming you wish to follow an index. If you wont this whole discussion is moot anyway.

SonOf

You still assume that there will always be buyers for the ETF index.

There will always be buyers as the price will fall to the level of demand.

Does that depend on the broker?

When I buy or sell funds on H&L, it happens on the same day if I put the order in before 0730.

No its the same with all platforms. UT/OEICs have a single dealing point in the day. They will transact at the next available dealing point. Some non-mainstream funds may not have daily dealing points. Settlement of UT/OEICs is usually T+2 or T+3 days.

Some platforms will prefund the settlement period allowing switches/trades to be next day.

tin586

newbinvestor wrote: »

I am aware of the Creation/Redemption Authorised Participant process although it is quite confusing, I believe it's just to keep the NAV and share price close.

You are right that Authorised Participants create/redeem ETF shares and arbitrage away any mismatch between the ETF share price and the underlying NAV.

As you will be aware, as a retail investor you deal in the secondary market with a market maker, who might also be an Authorised Participant for your ETF.

If sellers of the ETF overwhelm the number of buyers in the secondary market, the ETF’s spread between buy and sell prices will widen and you could get back a lot less cash than what your shares are ‘worth’.

If, due to a ‘secondary market disruption event’, there are no Authorised Participants willing to redeem your ETF shares, the ETF sponsor (iShares at least, according to my understanding) will redeem them directly. But of course they will set the t’s and c’s...

I would also imagine that if the ETF sponsor can’t sell the underlying securities because of a severe market dislocation, you could be redeemed by being handed the underlying in lieu of cash.

In an ETF meltdown scenario, if you are still holding the ETF shares at the time it goes into liquidation, you will get the cash value of the underlying assets once they are sold (almost undoubtedly less any ‘termination fees’; the ETF will probably hike its charges to make you pay them, instead of the ETF sponsor).

The risks are heightened if you dabble in small, esoteric ETFs, but in my opinion not worth remotely worrying about in the case of a large-sized ETF tracking a mainstream index like the S&P 500.

[Deleted User]

Thanks all. Still unsure whether to go for OEIC or ETF. Prefer the format of OEICs but like the low platform fee with ETFs.

bowlhead99

newbinvestor wrote: »

Thanks all. Still unsure whether to go for OEIC or ETF. Prefer the format of OEICs but like the low platform fee with ETFs.

Then why not select a different platform with a few structure that doesn't have a lower platform fee for ETFs?

[Deleted User]

bowlhead99 wrote: »

Then why not select a different platform with a few structure that doesn't have a lower platform fee for ETFs?

Because said fee structure (for OEICs) will be higher than any platform fee for ETFs (£45 capped with Fidelity)

Thrugelmir

SonOf wrote: »

There will always be buyers as the price will fall to the level of demand.

Depends on the liquidity in the stock being traded. Fire selling of stocks is a sure way of losing money. Market makers themselves only have limited funds.