Now with more than $2 trillion in assets, ETFs have become hugely popular — yet, ironically, the ability to trade them intraday has become a liability, with market volatility triggering a number of extreme situations in which ETFs have briefly traded at significant discounts to their NAV — in some cases, as much as 30%.

This may be of small consequence for buy-and-hold clients and their advisors, who did not trade during the recent price swings. But it highlights that, when ETFs experience bouts of illiquidity, they can trade at steep discounts. And this can be disconcerting for clients who need to trade during such market volatility — especially when they have a trade unwittingly triggered by the ill-advised use of a stop-loss market order.

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