How to minimise costs when switching from one ETF to another?

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YRT70
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How to minimise costs when switching from one ETF to another?

Post by YRT70 »

I have few changes I want to make to my portfolio. This involves selling one liquid ETF and buying another. I've noticed that it sometimes happens that when I sell one and prices of the one that I want to buy are trending upwards, there can be quite a gap, leading to extra costs.

To give an example say I'm selling 50k of VOO in order to buy 50k of VTI. From what I've read in other threads it's probably best to use market orders (although some people disagree).

I was wondering if there are any other methods that I can use to minimise the switching costs? Is there perhaps a way to have the buy and sell order execute at the same time?

I'm with Interactive Brokers if that matters.
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grabiner
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Re: How to minimise costs when switching from one ETF to another?

Post by grabiner »

The market moves are random; if you are out of the market for a minute between buying one fund and selling another, the market is just as likely to go down as up.

(With liquid ETFs, you don't have to be concerned about the non-random effects of spreads. If you sell an ETF and find that the low-volume ETF you want to buy as a replacement is trading at a 1% spread, you may want to wait more than just one minute before buying it.)
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YRT70
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Re: How to minimise costs when switching from one ETF to another?

Post by YRT70 »

grabiner wrote: Sun Nov 22, 2020 3:31 pm The market moves are random; if you are out of the market for a minute between buying one fund and selling another, the market is just as likely to go down as up.
I get that, it may work in my advantage too. But, if possible, I'd like to avoid the risk.

I think it's possible to enter the buy and sell order at the same time. That would reduce the time.
Marseille07
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Re: How to minimise costs when switching from one ETF to another?

Post by Marseille07 »

I don't think there's any way other than selling VOO then buying VTI immediately after. If you have extra money in your account then you can buy/sell at the same time (like, market open / close).
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