There are more than 1,400 ETFs covering very narrow emerging market segments to much larger indexes in developed nations. But more than 87 percent of the money invested in ETFs are with four providers; iShares, State Street, Vanguard and PowerShares. Does the size matters when investing in ETFs?
Buying ETFs are easy. But liquidating or selling ETFs could cause a problem when you want to unload in a hurry. An ETF could contain different company stocks in order to cover the segment it is anticipated to represent. Some stocks could be easy to sell but others may be difficult causing a liquidity issue. This is where the size of the ETF provider comes into play. Larger ETFs could easily absorb requests for redemptions without causing a problem for the holder. But smaller ETFs may not have the same leverage even with much better earnings.
Investors should consider the size of the ETF before buying. Many seasoned professionals say that individual investors should stay away from ETFs having less than $50 million in total assets in the fund. Even with a larger fund having more assets, seasoned professionals advice investors to buy using limit orders and buy below the net asset value (NAV).