Trading costs could also be a problem. Trading individual bonds in small amounts is notoriously costly and so the new ETFs may already be a cheaper option. But since they've so far attracted relatively few investors, the ETFs could still be costlier to trade than conventional bond ETFs.
Syosset, N.Y., advisor Carl Friedrich says he likes the idea behind the new ETFs and was on the verge of using one with his clients. He decided against it when he saw trading volume on the fund was about $170,000, or 3,300 shares a day. His client needed to buy about $100,000-worth. He feared a purchase order that size "would mean moving the price of the ETF," he says, driving up costs for his client.
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