As investors pay more and more attention to ETF, many investors want to know a question: Is the ETF fund share bigger, the better? There is no simple answer to this question. This paper will analyze it from many angles to help investors better understand this problem.

I. Mobility

Liquidity is one of the characteristics that ETF is often appreciated. The greater the trading volume of ETF, the higher the liquidity. Higher liquidity seems feasible, because high-liquidity ETFs are easier to buy and sell than low-liquidity ETFs, so investors can get liquidity when necessary. However, when the share of ETF funds is too large, this liquidity may decrease, resulting in a higher bid-ask spread.

Second, tracking error.

Another factor to consider is tracking error. The goal of ETF fund is to track its basic index in order to obtain the return related to that index. However, when the share of ETFs is too large, they may push the market price to an unreasonable level, resulting in the gap between ETFs and their indices, which is called tracking error. Some studies show that large-scale ETFs are more prone to tracking errors than small-scale ETFs.

Third, the cost

The management cost of ETF is usually lower than that of traditional investment funds. However, the management fee may increase with the increase of ETF fund share. This may lead to an increase in the cost of the fund and a decline in the overall income of the fund.

Fourth, competition.

Smaller ETFs may need to compete with large ETFs through their low cost, high liquidity or small and advantageous industries. Therefore, if the share of an ETF is too large, it may become unable to compete with smaller ETFs, thus losing its advantage.

To sum up, apart from the advantage of liquidity, large-scale ETF is not always a better choice. For investors, it is very important to choose an ETF with the right scale, which can help them get the best return on investment.