Summary

• An ETF or a mutual fund becomes too big when it becomes the market, meaning when transactions of the ETF or mutual fund impact the market in both directions.
• A second criterion is the liquidity of the single positions. If the ETF/fund can easily buy, but even more importantly, liquidate any position in the portfolio over a reasonable period of time, it is not too big for its market.
• The Vanguard S&P 500 ETF is investing in the largest and most liquid stock market on earth. When it comes to this, I don’t believe that there is a general liquidity risk related to VOO which is caused by its $1.0 trillion-plus in assets under management.

By Detlef Glow

The question of when an ETF is too big was asked by market observers and journalists when the Vanguard S&P 500 ETF (VOO) reached more than $1.0 trillion in assets under