As of the end of 2025, there were approximately 4,800 exchange traded products -- exchange traded funds (ETFs) and exchange traded notes (ETNs) – listed on U.S. exchanges.
That number is far from static. While some ETFs are sent out to pasture, the fact is seemingly every year brings another record batch of ETF launches. Volume of launches is one thing. Finding success is another and that’s the hard part.
“New product success is rare but rewarding: Only 20–30% of active ETFs launched since 2015 have crossed the $1 million revenue threshold within three years. Those that do often generate 10–30x more revenue than subscale peers,” notes ISS Market Intelligence.
What’s also hard to come by for many new ETFs is on-screen volume and that’s potentially problematic because many investors, even plenty of advisors, use volume as a primary criteria for judging an ETF’s – new or otherwise – merit. That implies the most heavily traded ETFs are the “best” and the thinnest traded are the “worst.” However, the reality is all volume tells us is how frequently an ETF changes hands – not if it’s delivering good or bad returns.
Reality Check Part 2
Another ETF reality is that only a slim percentage of the overall universe meets the arbitrary seven- or eight-figure (or more) daily dollar volume requirements many investors are looking. As it relates to new ETFs, focusing on turnover can lead to missing out on potentially rewarding assets.
“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,” notes American Century. “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.”
So what’s an advisor or an investor to do when encountering a low volume ETF they find desirable? Like so many things in life (and investing) it’s best to keep things and think strategically. That starts with using limit orders – something all market participants can do. And if you’re an advisor “moving weight,” there are other avenues to consider.
“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,” adds American Century.
No Need to Run Away from Low Volume ETFs
It bears repeating that an ETF’s volume isn’t a commentary on its investment. That’s akin to saying the most popular kid at school will go on to become the most successful later in life.
It’s also worth remembering that an ETF’s liquidity is sourced from its underlying holdings and on the secondary market – a combination ensuring that even thinly traded ETFs have enough liquidity to absorb large buy and sell orders without being disrupted. And for the advisors out there, remember you’ve got tools at your disposal to make it easier to embrace low volume 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,” concludes American Century.
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