Think Low-Volume ETFs Are Risky? Think Again
Low trading volume alone shouldn’t drive an ETF decision if the fund aligns with an investor’s goals. With a few simple steps, low-volume ETFs can trade efficiently—unlocking opportunities that many investors overlook.
Key Takeaways
The surge in the number of actively managed ETFs offers investors more ways than ever to pursue tax-efficient alpha.
The depth of liquidity in the ETF vehicle means low volume alone isn’t a reason to overlook ETFs that align with clients’ goals.
Making the most of low-volume ETF opportunities begins with understanding the key strategies for successful trade execution.
You’ve done your research. You’ve done your due diligence. You’ve determined that a lower-volume ETF may bring better investment outcomes. Now what?
Unlike stocks, the ETF vehicle features different layers of liquidity—and the creation and redemption process—that allow investors to trade ETFs in amounts that can far exceed an ETF’s average daily volume without significantly affecting the price.
The volume you see on the screen represents only what has been traded of an ETF, not what can be traded.
Thus, low trading volume1 and a wider bid-ask spread should not deter you from investing in an ETF that you believe would better suit a client's overall portfolio.
How Does Knowing ETFs’ Liquidity Dynamics Expand Your Opportunity Set?
Indexed ETFs are often the first consideration for clients’ portfolios because of their large assets under management and high trading volume. There is a common misconception that new or niche ETFs are inaccessible and trade inefficiently due to their small size, low trading volume and wider spreads.
That misconception can mean missing out on new products with unique investment strategies that target specific goals and potentially produce outcomes that exceed those of index-based approaches.
Surging Active ETF Launches Are Expanding Investors' Options
ETFs Launched | % Active ETFs | |
2025 | 1,100+ | 85% |
2024 | 700 | 77% |
Source: Morningstar Direct. Data as of 12/31/2025.
There’s no reason to let low trading volume alone limit your choices if the ETF aligns with an investor’s goals because liquidity is ultimately determined by its underlying holdings—not daily volume. However, having the right ETF trading strategy is essential.
Here are some tips for making informed trading decisions with low-volume ETFs.
What Are Best Practices for Trading Low-Volume ETFs?
Making the most of low-volume ETF opportunities begins with understanding the key strategies for successful execution.
Work with your custodian’s institutional trade desk.
A preferred route is to take advantage of the traders at your custodian’s institutional trade desk. They have direct access to the ETF liquidity providers who will compete for the order flow and provide efficient execution.
Use a limit order instead of a market order.
If you don't have access to an institutional trading desk, limit orders are an effective way to trade low-volume ETFs because they help control the price parameters of the purchase, protecting you from unexpected market swings.
With a limit order, you specify the maximum price where you are willing to buy or the minimum price where you are ready to sell, which protects the requested execution price you have for the ETF. Depending on the size of the trade, it’s best to set the execution price a few pennies below the current best bid (for sells) and above the best offer (for buys).
Develop a relationship with your custodian’s institutional trade desk. Here are ways the traders can help you efficiently trade ETFs:
- Talk through specific size minimums or requirements before sending the trade.
- Identify the best way to submit the trade.
- Discuss technology requirements for submitting trades.
Note: Some desks charge a fee to place a trade.
Why You Shouldn’t Let Low Trading Volume Limit Your ETF Choices
There is no need to walk away from an ETF just because its trading volume is low. The innovative design of this investment vehicle gives it the depth of liquidity to dynamically respond to supply and demand—offering investors new avenues for pursuing tax-efficient alpha.
And you are not alone when trading ETFs. For large and small trades and to navigate market volatility, take advantage of the expertise and tools available. The community of ETF professionals is a valuable resource to help advisors fulfill clients’ needs.
If you have questions regarding trade execution, please contact the American Century Investments ETF Capital Markets Desk through your American Century Investments or Avantis Investors® representative.
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Low trading volume typically refers to trading fewer than 10,000 shares a day.
Trading volume is the total number of shares of a security traded during a given period of time.
Limit order is an order placed with a bank or brokerage firm to buy or sell a fixed amount of an investment at a specified or better price. Investors can limit the amount of time the order is valid before being cancelled. But if the investor’s specified price cannot be met during the set timeframe, the trade will not be executed. As such, there is no guarantee that a limit order will result in an executed trade.
Alpha is typically used to represent the value added or subtracted by active investment management strategies. It shows how an actively managed investment portfolio performed compared with the expected portfolio returns produced simply by benchmark volatility (beta) and market changes. A positive alpha shows that an investment manager has been able to capture more of the upside movement in the benchmark while softening the downswings. A negative alpha means that the manager’s strategies have caught more benchmark downside than upside.
Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.
The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.
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