Bond ETF Pricing: Efficient or Erratic?
Premiums and discounts on your bond ETF aren't as bad as you think.
Note: This article was originally featured in January 2011, but in case you missed it, we are re-featuring it today as part of ETF Investing Week.
Everyone who follows and invests in the stock market, by and large, understands and is comfortable with how an exchange market works. For any security on the exchange, there is an order book with a list of buy and sell orders. Trades happen when the exchange matches a buy and a sell at the same price. This is simple and intuitive and creates an environment where everybody can know, at the same time, the fair price of any security.
Timothy Strauts does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.