4 ms·
What happens when the ETF value goes down not because the value of the underlying stock goes down but because people are selling the ETF? Won't they need to re
by thtthings 7y ago
What happens when the ETF value goes down not because the value of the underlying stock goes down but because people are selling the ETF?
Won't they need to rebalance then? The way it will happen is they will have to sell all the stocks in the ETF according to their percent allocation
- asdfasgasdgasdg 7y agoAuthorized participants [1] will buy the undervalued shares and redeem them for shares in the underlying fund for a profit. FWIW, there is no such thing as "rebalancing" an ETF. The underlying fund can rebalance, but the ETF is an exchange-traded representation of the underlying fund. There's nothing in it to rebalance. [1]: https://www.etf.com/etf-education-center/7540-what-is-the-etf-creationredemption-mechanism.html?nopaging=1 https://www.etf.com/etf-education-center/7540-what-is-the-et...
- wbl 7y agoWhen people sell shares in the ETF they sell shares in the ETF. It is not a mutual fund redemption.