ETF companies frequently publicize their transparency. However, retail investors may not have the idea of what they are really possessing, what type of risks they are catching, or how much they are compensating for it, even the simplest of the exchange-traded funds.
The investors seemed to be blinded of what the real picture really is.
Among the unclear parts is the information on real-time holdings, lying beneath the costs and risks of ETF connected with stuff like securities lending.
According to the ETF industry observers noted that the breaks in transparency sharply give emphasis to the knowledge professional traders have compared to those individual investors.
Did you know that 39% of the assets in ETF at Charles Schwab Corp. are held by retail investors? This is a sixteen percent increase last year. The hidden issues is not really a dilemma for investors today, but in time, as there is an increasing number of investors trading ETFs, then it might become a big concern.
Analysts say that compared to actively managed mutual funds, exchange-traded funds are more transparent. However, there are still lots of gaps seen that could hurt investors.
For individual investors, having no access to free and real-time information can result to overpaying an ETF.
For professional traders, they have access to free and real-time information that present by the millisecond. Ordinary investors frequently depend on free websites, which is fifteen minutes delayed to the real-time information.
This could mean that the investor may be buying the ETF at a discounted rate, but in reality is buying the ETF at premium.
The concern here is that the ordinary investor may call in to but the ETF based on what he has seen on the free website. This may also involve not double-checking the information through his brokerage website.
This may become an embodiment of trading on poor information. To save ordinary investors from missing the best deals of their lives, transparency of the ETF companies’ real-time holdings should be set up and also filling up the gaps.