> Technically this would work with any interlisted stock, though the DLR ETF is very popular for this because of its liquidity.
An interlisted bank/telecom stock has far more liquidity than DLR does.
This is a bit of a problem because you’ll pay at least half a cent or a cent in spread for your purchase and sale to the market makers. This adds up a lot more quickly on a $10 DLR than a $100 bank stock that’s liquid enough to have the same spread.
A 1cent spread costs you 0.1% for the buy and then again for the sale on DLR. On a $100 stock, it’s 0.01%.
DLR’s advantage is that it isn’t volatile because it only holds dollars and nothing else.
If you use a bank stock, the advantage is that you’re “in the market” during the duration of your trade. On average, that’s a plus, but you could lose/gain a few percent in the time it takes to journal.
The other disadvantage of DLR is that it does have a management fee. You shouldn’t hold it for long periods, but it’s another mark against DLR.
An interlisted bank/telecom stock has far more liquidity than DLR does.
This is a bit of a problem because you’ll pay at least half a cent or a cent in spread for your purchase and sale to the market makers. This adds up a lot more quickly on a $10 DLR than a $100 bank stock that’s liquid enough to have the same spread.
A 1cent spread costs you 0.1% for the buy and then again for the sale on DLR. On a $100 stock, it’s 0.01%.
DLR’s advantage is that it isn’t volatile because it only holds dollars and nothing else.
If you use a bank stock, the advantage is that you’re “in the market” during the duration of your trade. On average, that’s a plus, but you could lose/gain a few percent in the time it takes to journal.
The other disadvantage of DLR is that it does have a management fee. You shouldn’t hold it for long periods, but it’s another mark against DLR.