Investors often choose to allocate to the largest fund in a particular sector due to liquidity concerns. However, liquidity concerns may be overblown, particularly for large-cap ETFs. And investors may miss out on compelling opportunities if they are too focused on trading volume or overall fund size.
Liquidity is one of investors’ favorite aspects of ETFs. The ETF structure can offer the same broad diversification as indexed mutual funds, but notably can be traded during market hours like individual stocks.
While many investors focus on trading volume, it is just one of two components involved in calculating a fund’s liquidity. Importantly, the liquidity of an ETF is primarily determined by its underlying basket of securities. This may allow an ETF to trade in amounts exponential to its average daily trading volume.
Liquidity matters the most when an investor is looking to establish a position in an ETF or exit that position. Lower levels of liquidity may lead to greater bid/ask spreads, larger discrepancies between net asset value (NAV) and the value of the underlying securities, and a decreased ability to trade profitably.
To summarize, an ETF’s liquidity is directly linked to the liquidity of its underlying securities. Therefore, to accurately assess an ETF’s liquidity, it’s crucial to examine the portfolio’s holdings. Relying solely on total assets or trading volume may be misleading.
Understanding the Liquidity Underlying the TOV ETF
Due to the JLens 500 Jewish Advocacy U.S. ETF’s (TOV ) unique methodology, which empowers investors to combat antisemitism and hate, support Israel, and promote the Jewish value of Tikkun Olam (repair the world), many advisors may be surprised to learn of the incredible liquidity underlying TOV.
The TOV ETF tracks the JLens 500 Jewish Advocacy U.S. Index. The index includes most of the 500 largest U.S. public companies. These large-cap stocks are generally considered highly liquid, which should contribute to the ETF’s overall liquidity.
The process begins by screening the 500 largest U.S. public companies and removing companies with business activities that do not align with Jewish values. Next, the remaining companies are scored on their performance on three Jewish value scorecards, inspired by Judaism’s framework of Mitzvot (obligations), which impacts security weighting in the index.
Finally, to protect long-term shareholder interests, TOV actively engages with corporate leadership to support its goals.
The TOV ETF only screens out a minimal number of stocks because it prioritizes an “own and advocate” investment approach. At the time of launch in February 2025, only four of the 500 largest U.S. public companies were excluded. This means the TOV ETF provides exposure to a large group of highly liquid large-cap companies.
For more news, information, and analysis, visit the Faith-Based Investing Content Hub.
VettaFi.com is owned by VettaFi LLC (“VettaFi”). VettaFi is the index provider for TOV, for which it receives an index licensing fee. However, TOV is not issued, sponsored, endorsed, or sold by VettaFi. The Fund has no obligation or liability in connection with the issuance, administration, marketing, or trading of TOV.
