I’m guessing the prices are different.

Prices during market-crisis periods are incredibly volatile and hard to estimate. Pricing algorithms fail to take into account human nature, which, during periods of market stress, will demand an unusually good price before they actually trade a bond.

The net result of this is that when the bond market goes south, bond ETFs often trade at a discount to their stated NAV. 

What does that mean for you?  Like any illiquid asset, the best time to sell a bond ETF is not during a panic. You’ll get a fair price, but it may not be the price you want. 

(Note: If the idea of not being able to trade at NAV scares you, the alternative is probably worse. Think of what happens to a bond mutual fund during a crisis. Mutual funds, unlike ETFs, are required to allow investors to redeem shares at NAV. If a lot of investors sell out of a bond mutual fund during a crisis, it will have to sell enough bonds to pay out the full stated NAV in cash. If this NAV is artificially inflated compared with the true clearing price of the underlying bonds, the fund will have to sell more of its portfolio than it “should,” harming all the shareholders who don’t sell out.)


Fear No. 3: The Winkelvoss Twins Launching A Bitcoin ETF
Actual Concern: High

If you want something to worry about, consider this: The Winklevoss twins of Facebook fame have filed to launch a “Bitcoin” ETF.

Bitcoins -- the technological pseudo-currency beloved by money-laundering libertarians everywhere -- have historically been difficult and/or scary for most investors to buy. But now the Winklevi … working with some of the most sophisticated ETF lawyers in the world … have come up with a way to package Bitcoins into an exchange-traded product that you can buy and sell in your Schwab account.

What could go wrong? How about everything.

Beyond the fact that Bitcoins are a virtual currency with no real underlying value, the filing for the Bitcoin Trust outlines 18 pages of risks and concerns that investors should worry about. Among them? As a great blog on the Wall Street Journal reports, there is the concern that hackers could break into the Bitcoin Trust, uncover its “private keys” and steal all the money. To quote the prospectus via the WSJ blog: “there is a risk that part or all of the trust’s Bitcoins could be lost, stolen or destroyed.”