ETFs offer transparency, tax-efficiency, low-cost diversification and “trade-ability.” These factors give investors an incredible edge on controlling costs and risks.
Yet not all ETFs are equally tradeable; that is, while they may indeed trade throughout the day like individual stocks, limited investor interest may lead to an undesirable bid-ask spread.
It follows that investors may find themselves buying at an intra-day price that may be anywhere from .5% to 1% more as well as selling at an intra-day price that could be .5% or 1% less than hoped for. And this is most common in low volume ETFs that trade few shares throughout the day.
In my own endeavors, I typically steer far away from the low volume ETFs out there. Not only does there tend to be a greater risk of the fund being folded by the provider, but for those of us who use stop-loss protection, low-volume ETFs can execute at really poor prices.
Full Story: http://www.etfexpert.com/etf_expert/2009/04/etf-expert-lowvolume-etfs-that-fly-under-the-radar.html