How can I tell if an ETF is sufficiently liquid? How much should it have in assets? How much should the minimum average daily volume be?

  • 2
    sufficiently liquid for what? – GS - Apologise to Monica Jul 21 '19 at 19:03
  • To make it safe enough to buy, so that we know we can sell it when we need to. – Zesty Jul 21 '19 at 19:06
  • All large- and mid-cap funds are just about guaranteed to be liquid, by the very fact that liquidity flows naturally flows naturally size. – RonJohn Jul 21 '19 at 19:12
  • Thanks, Ron, but is a more generalized answer possible? Is there a known threshold that experienced investors use? – Zesty Jul 21 '19 at 19:18

Lower levels of liquidity lead to greater bid-ask spreads.

Liquidity is affected by:

  • ETF composition
  • The trading volume of the components
  • And to some degree, the trading volume of the ETF
  • The sector that the ETF emulates
  • The risk of the components (narrow versus broad based)

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