How important is an ETF volume?

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Topic Author
shy
Posts: 8
Joined: Sat Jun 07, 2014 7:02 am

How important is an ETF volume?

Post by shy »

Hi
I'm looking for a US government intermediate bonds ETF. My first thought was to buy SPDR Barclays Intermediate Term Treasury ETF (symbol ITE, TER 0.13%). But, as I understood, I would have to pay 30% tax on dividends as a non us resident (I live in Israel).
So I found what seems to me like a good alternative, which is ISHARES USD GOVERNMENT BOND 3-–7 UCITS ETF ACC (symbol CBU7, TER 0.23%) and is domiciled in Ireland.
My concern is that its trading volume is very low - the average volume over the last 3 months according to yahoo finance is 5,436. In fact, it's not even open for trading on my bank account site.

Considering I'm planning to buy and hold for the long run (I'm 37yo and saving for retirement), is this really an issue?
Is there a better alternative I've overlooked?
Would also love to hear if anyone knows why is this ETF so "unpopular".
jdilla1107
Posts: 849
Joined: Sun Jun 24, 2012 8:31 pm

Re: How important is an ETF volume?

Post by jdilla1107 »

I would not touch an etf with that low of volume.

I don't really understand your tax situation, but can you just do a mutual fund?
Topic Author
shy
Posts: 8
Joined: Sat Jun 07, 2014 7:02 am

Re: How important is an ETF volume?

Post by shy »

Hi jdilla1107
Thanks for the heads up. I guess I'll pass on that CBU7 ETF.

As for my tax situation, I believe I fall under the definition of 'non-resident alien' which means (according to this http://www.investopedia.com/terms/n/non ... talien.asp):
"Dividends are taxed at 30% for every non-resident alien, while capital gains are not subject to U.S. tax".
To the best of my knowledge there's no treaty between Israel and the U.S that lowers this tax.

How would investing in a mutual fund can help me in this matter?
ftobin
Posts: 1071
Joined: Fri Mar 20, 2009 3:28 pm

Re: How important is an ETF volume?

Post by ftobin »

I wouldn't be concerned with volume unless the ETF was in danger of going under. Vanguard international small cap, VSS, has low volume as well.

What matters is liquidity and spread. I see a spread of 0.10%, and $250K on the offer. I wouldn't be worried. VSS has much less on the bid/offer.
Topic Author
shy
Posts: 8
Joined: Sat Jun 07, 2014 7:02 am

Re: How important is an ETF volume?

Post by shy »

Hi ftobin
Thanks for your reply though now I've got two conflicting opinions and am back to square one :?
I'll try to research the liquidity, spread and offer you mentioned and see what I can find.
I have to admit it does trouble me that no one trading using my bank site has yet to acquire this ETF (which is why it's still not available for purchase with it).
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