ETFs are not the enemy. That’s the lesson drawn by columnist John Jannarone in the article ETFs Lose Their Way In a Panicked Market.
Jannarone reminds investors that exchange traded funds offer transparency, generally low fees and are usually liquid.
However, during market panics, market makers can desert their responsibilities. That’s what happened recently to the iShares Russell 1000 Value fund (IWD) which fell from $60 to a few cents before bouncing back to normal levels.
Investors with standing market orders that didn’t specify price were caught in the down draft. Although some trades were cancelled, others remained effective.
The lesson — be careful with market orders and don’t blame ETFs.