ETF Is slippage a significant problem?

So I've finally begun my journey. Just a smidgeon under $10k into VAS yesterday. As soon as my funds clear overnight, I will be making my second trade which will be into A200.

My order for 135 VAS units was filled in two blocks, 1 block of 10 units and 1 block of 125 units. Both blocks had the same price of $71.10. Even though the two blocks were filled at the same price, the fact my order was filled in 2 blocks got me to thinking about slippage and whether it would be a significant issues with larger orders. I know ETFs have "market makers" but am not sure exactly how that works or whether it affects the possibility of price slippage.

So my question is, would regular Index ETFs such as VAS and A200 be likely to suffer slippage problems if I were to invest larger sums. eg: $250-300k at a time?

ETA: Of course I could use limit orders and avoid slippage altogether. So my question relates to using a market order with the idea being to just get the units bought and not have to sit around waiting for my order price to be hit.

 

When you purchase in larger quantities than the average parcel size you may increase the market with your trade so it is unlikely you could get $200k at a specific price.

That is exactly the problem a fund manager faces when they want to buy or sell because they are dealing with larger portfolios. So if, for example the market price triggered a buy, the manager trying to get a position in VAS would do their thing but at those volumes they would only get a percentage at that particular target price. In fact, I'd hazard a guess, that the resistance levels that all the traders out there are trying to discover are the same triggers that the big funds / algorithmic trading platforms use - the big fish make the market.

Do some research on strategies for buying large parcels. I'm just a little tadpole who nips away at ~10k chunks and find these generally get taken in one go 90% of the time.

You also need to balance the importance of share price versus amount in the market. Eg you may want $200k of VAS @ $70. You put in the order and you get $50k worth but then it goes back up to $70.50. Do you buy at this higher less attractive price or wait, knowing that the price may go up to $71. If you think, I can be patient, in no time it will be back at $75.

All first World problems.......and I'm sick of dealing with them.

 

What’s that saying - compared to world peace .... .

The more liquid / trading that occurs with an ETF the less these things are an issue if an issue at all especially with plain vanilla popular ETFs. I purchased $150K of VAS recently with it filled promptly in a single parcel from memory. Just checked to confirm as shown below, filled as a single parcel:



Try doing that with some LICs such as AUI (god forbid sometimes $10K is an issue) which can be a pain in the butt liquidity wise at times and hence why I don’t invest in it.

Not sure about A200 ETF with it being new and as I have no interest in it I haven’t ever looked into such things.

This article might be of interest in regard to similar and older ETFs to A200:

Australian index ETF showdown: IOZ, STW & VAS compared

Why are you buying both VAS and A200? I can’t help but feel competing fees will end up irrelevant over time as Vanguard in particular will likely narrow any gap from competitors with STW usually following suit albeit kicking and screaming but generally a bit more expensive. Hence I personally invest in the strength of the index provider rather than fee alone.

 

Thanks for the responses.

As for why investing in both VAS and A200....

Mostly it's the fee. I agree that over time the fee gap is likely to close but at the moment A200 is half that of VAS. So why not put it all into A200 now? Because, like you mention, the strength of Vanguard compared to Betashares is comforting. Along with the fact that if the **** hits the fan the liquidity of VAS appears to be significantly better than A200. I think it in the end it has come down to the fact I just couldn't make up my mind on which to invest in.

Having said all that, the article you linked to was interesting in one particular aspect. I was interested to see that at the time of writing VAS had the highest yield and second lowest average franking component. One of the reasons I'm starting my portfolio with ETFs is because they generally have lower franking. I figure invest in these now and make a final decision on LICs once a little more clarity regarding franking comes to light.

 

Happens with shares too. Ya learn to live with it. Overall I don't think it matters a rats in the long run.

 

I guess the market maker makes it possible for VAS. @Nodrog is right though, not possible with the illiquid LICs.

 

Sure does. That’s the nature of decent ETFs. They create liquidity when needed.