Exchange traded funds are exceptional tools for allocating client portfolios, but they can lose their effectiveness if implemented incorrectly. The “T” in ETF is often neglected by both new and long-time users of ETFs. A simple review of the often mystical world that underpins ETF trading can be helpful.

To start, ETFs essentially trade in two distinct markets.

Let’s start with the secondary market — what is referred to as the “on-screen” market. The quotes we all see on the screen when we punch in an ETF ticker is the price one would pay in the secondary market. Trading in the secondary market is very similar to trading a stock.

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