Covid crash #2 started

Sailtheworld

Thrugelmir said:

Sailtheworld said:

Alexland said:

ProDave said:

I have put my money where my mouth is, and sold one of my funds to lock in it's summer gain.

Thanks I have some regular money going in to buy your investments for less than (1) they were previously worth and (2) will be worth in the distant future when I sell them. 

I put the maximum possible contribution into my SIPP at the start of the tax year and bought VWRL. I'd love to know who sold them to me so I could send a thank you card.

No one. Vanguard creates or cancels units accordingly.  As a market participant you helped push the market prices of the underlying stocks higher. 

It's an ETF so someone wished to sell their shares (rather than units) on the open market - luckily they found me.

Alexland

Thrugelmir said:

No one. Vanguard creates or cancels units accordingly.  As a market participant you helped push the market prices of the underlying stocks higher. 

Not quite the ETF units that Sailtheworld purchased were probably from a market maker's warehouse and only occasionally would the market maker swap a basket of assets with Vanguard for new ETF units. It won't be happening dynamically with each market order. It is possible some or all of the ETF units may have come from someone else selling them to the market maker.

talexuser

The problem with saying the markets have already priced something in, is that they obviously haven't just before a bubble bursts and the crash happens. I worry that next time around it will be worse because the long time low interest enviroment has made relatively unsophisticated people go to dividends for income (or just chase the flavour of the month growth) and they might not have the experience to weather a storm, panic and sell on masse at the first sign of the big boys auto trades swtching into action.

Sailtheworld

Alexland said:

Thrugelmir said:

No one. Vanguard creates or cancels units accordingly.  As a market participant you helped push the market prices of the underlying stocks higher. 

Not quite the ETF units that Sailtheworld purchased were probably from a market maker's warehouse and only occasionally would the market maker swap a basket of assets with Vanguard for new ETF units. It won't be happening dynamically with each market order. It is possible some or all of the ETF units may have come from someone else selling them to the market maker.

I think they're called creation units where an institutional investor buys the underlying shares and converts them to ETF shares.

It's likely that I just bought someone else's shares on the open market. I suppose if I bought shares from creation unit swaps I should also send a thank you card to whoever sold the underlying shares at such low prices in April.

Thrugelmir

Alexland said:

Thrugelmir said:

No one. Vanguard creates or cancels units accordingly.  As a market participant you helped push the market prices of the underlying stocks higher. 

Not quite the ETF units that Sailtheworld purchased were probably from a market maker's warehouse and only occasionally would the market maker swap a basket of assets with Vanguard for new ETF units. It won't be happening dynamically with each market order. It is possible some or all of the ETF units may have come from someone else selling them to the market maker.

Both March and April saw an extremely high volume of unit trade. If activity is correlated to the broader markets this would suggest net purchasing. 

Sailtheworld

Thrugelmir said:

Alexland said:

Thrugelmir said:

No one. Vanguard creates or cancels units accordingly.  As a market participant you helped push the market prices of the underlying stocks higher. 

Not quite the ETF units that Sailtheworld purchased were probably from a market maker's warehouse and only occasionally would the market maker swap a basket of assets with Vanguard for new ETF units. It won't be happening dynamically with each market order. It is possible some or all of the ETF units may have come from someone else selling them to the market maker.

Both March and April saw an extremely high volume of unit trade. If activity is correlated to the broader markets this would suggest net purchasing. 

New share creation is probably very small compared to shares outstanding and it's the capital direction that's important rather than volume. VWRL has attracted capital since launch so institutional investors have consistently been buying the underlying assets since then.

Most trading though will simply be transfer of shares from one holder to another via a broker on the open market.

Michael121

Sailtheworld said:

Thrugelmir said:

Alexland said:

Thrugelmir said:

No one. Vanguard creates or cancels units accordingly.  As a market participant you helped push the market prices of the underlying stocks higher. 

Not quite the ETF units that Sailtheworld purchased were probably from a market maker's warehouse and only occasionally would the market maker swap a basket of assets with Vanguard for new ETF units. It won't be happening dynamically with each market order. It is possible some or all of the ETF units may have come from someone else selling them to the market maker.

Both March and April saw an extremely high volume of unit trade. If activity is correlated to the broader markets this would suggest net purchasing. 

New share creation is probably very small compared to shares outstanding and it's the capital direction that's important rather than volume. VWRL has attracted capital since launch so institutional investors have consistently been buying the underlying assets since then.

Most trading though will simply be transfer of shares from one holder to another via a broker on the open market.

Im confused what are you all talking about here, buying shares from etf or units from vanguard, whats the difference, are you all saying it was cheaper to buy an etf if you picked up the shares directly from someone selling? 

bowlhead99

Michael121 said:

Sailtheworld said:

Thrugelmir said:

Alexland said:

Thrugelmir said:

No one. Vanguard creates or cancels units accordingly.  As a market participant you helped push the market prices of the underlying stocks higher. 

Not quite the ETF units that Sailtheworld purchased were probably from a market maker's warehouse and only occasionally would the market maker swap a basket of assets with Vanguard for new ETF units. It won't be happening dynamically with each market order. It is possible some or all of the ETF units may have come from someone else selling them to the market maker.

Both March and April saw an extremely high volume of unit trade. If activity is correlated to the broader markets this would suggest net purchasing. 

New share creation is probably very small compared to shares outstanding and it's the capital direction that's important rather than volume. VWRL has attracted capital since launch so institutional investors have consistently been buying the underlying assets since then.

Most trading though will simply be transfer of shares from one holder to another via a broker on the open market.

Im confused what are you all talking about here, buying shares from etf or units from vanguard, whats the difference, are you all saying it was cheaper to buy an etf if you picked up the shares directly from someone selling? 

Don't worry about it.

In an open ended fund, if someone wants to sell they give their share back to the fund manager and the fund manager pays them out of the fund's spare cash and cancels the unit. If someone wants to buy they will subscribe for a new unit and the manager will take their cash into the fund, give them a unit, and spend the cash on buying new investments. 

In an ETF, if someone wants to buy they will go to the stockmarket and bid for a share on the open market and buy one from a seller.

Sometimes there may be such demand to buy or sell an existing share of the ETF that the buys exceed the sells or the sells exceed the buys to an extent that the price of the ETF would rise or fall by more than the value of its underlying assets, because of excess demand or supply.  In that case the manager will allow for the demand or supply to be satisfied by an entity literally giving the ETF a basket of assets (most or all of the underlying shares that the ETF holds) in exchange for a block of brand new shares of the ETF ('creation units'); those new shares of the ETF are then available to be immediately sold in the market to a cash buyer to satisfy the demand.

Likewise if everyone wants to sell their shares because they don't like the look of the market, someone needs to buy those shares from the sellers otherwise you won't be able to sell at a sensible price relative to what the underlying assets held by the ETF are really worth. So what happens is the creation process mentioned above goes into reverse - and the ETF will buy back a block of its own shares with the intention of cancelling them and shrinking the size of the ETF. The EFT won't have the cash to 'buy them back' so it just gives a defined basket of assets to the broker-dealer in exchange for the shares it's going to buy back.  So the 'middleman' is able to receive shares fof the ETF from willing sellers of those ETF shares in the market, give those shares to the ETF for cancellation, and get some of the ETF's assets in return.

In this way, the ETF market should stay reasonably orderly. The ETF managers will publish a daily list of what the standard basket of shares will be for a creation unit (although for various reasons the basket of assets they accept in to create a new 'creation unit' block of shares, might not be the exact same set of assets as what they give out as a redemption unit).  So the ETF is semi-open ended even though to you and me it is traded on the stock exchange like any normal company share or closed ended investment trust.

If you buy an ETF in the market you might end up getting an existing share from an exiting investor or a newer share that was only just created that day to satisfy demand. As a buyer, you are indifferent as all the shares of the ETF are homogeneous with the same rights and risks and rewards of ownership and there's no price advantage on getting one that has been 'in circulation' for years vs one that was created that morning.

Michael121

@bowlhead99
Interesting. Thanks for clearing that up, appreciate the effort you put into educating some of us

Sailtheworld

Michael121 said:

Sailtheworld said:

Thrugelmir said:

Alexland said:

Thrugelmir said:

No one. Vanguard creates or cancels units accordingly.  As a market participant you helped push the market prices of the underlying stocks higher. 

Not quite the ETF units that Sailtheworld purchased were probably from a market maker's warehouse and only occasionally would the market maker swap a basket of assets with Vanguard for new ETF units. It won't be happening dynamically with each market order. It is possible some or all of the ETF units may have come from someone else selling them to the market maker.

Both March and April saw an extremely high volume of unit trade. If activity is correlated to the broader markets this would suggest net purchasing. 

New share creation is probably very small compared to shares outstanding and it's the capital direction that's important rather than volume. VWRL has attracted capital since launch so institutional investors have consistently been buying the underlying assets since then.

Most trading though will simply be transfer of shares from one holder to another via a broker on the open market.

Im confused what are you all talking about here, buying shares from etf or units from vanguard, whats the difference, are you all saying it was cheaper to buy an etf if you picked up the shares directly from someone selling? 

I bought some shares from someone in April on the cheap and wished to thank them. That's all.

Another poster said I didn't buy them off anyone as they were simply created via new units. ETFs are shares not units so we had a meander down a rabbit hole.