How to Safely Navigate Through Crowded ETF Waters
by David Fry
I once interviewed a successful exchange-traded fund (ETF) sponsor and had the temerity to offer some suggestions where some ETFs were needed.
The response from this person was: “Look, we’re not interested in filling needs as much as we are in building a business.” This made an important point: Investors must align their investments to match their needs versus the business interests of sponsors.
In this article
- Nearly $1 Trillion Invested
- Being First Has Its Advantages
- ETNs versus ETFs
- ETPs That Fail
- What’s That Index Again?
- Fees Matter
- Actively Managed ETFs
- Inverse ETFs
- Leveraged ETFs
- Creating ETF Portfolios
- Conclusion
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The market for exchange-traded funds has never been more robust and expansionary. The most prominent activity for sponsors is similar to a game of Battleship in which the winner fills all the slots before the next guy. Why? Because the “first mover advantage” to a sector and index cements their brand as “the go-to shop.”
The most important activity for investors remains focusing on those ETFs that work and matter to them versus any sponsor’s marketing campaign.
It’s hard to imagine that in 2005 we published an essay in our newsletter, the ETF Digest, entitled “The ETF Tsunami” that discussed the then-impending flood of new ETF issues about to hit the markets. Obviously, it seemed even then the sector was undergoing explosive growth, but with today’s level of issuance “tsunami” seems an understatement.
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Discussion
I am a new member, I have seen very little discussion concerning the NUVEEN ETFs. Is there any past or pressent discussinos about this group of funds?
posted over 2 years ago by Dan from Florida
I am an older person with investments in Vanguard and Fidelity. My effort is to transfer some of these to ETFs.I have yet
to find which ETFs will fulfill my need.
posted over 2 years ago by Patt from Maryland
Why would I comment on general data with little specificality!
posted about 1 year ago by Curt from Florida
Good question, Curt. Why indeed comment at all?
Pat. Vanguard has a great selection of ETF's you can buy through their brokerage house at no commission. I use them to support the Wellington (balanced) and the Precious Metals managed mutual funds. They include; Heath Care ETF, Emerging Markets, EuroPacific, domestic and world REITs, Energy and Dividend Appreciation.
I do feel a downturn in all these holdings is more than possible but decided against using a ETF to short. We have no choice but to face the music. I do hold a few individual stocks, but less than 10 percent of portfolio. I believe ETF and mutual funds are the way to go for most of us.
posted about 1 year ago by Jerald from Virginia
Good article on ETF's. I am invested in gold and silver ETF's(about 15% of my portfolio) and they follow the gold & silver market prices very closly. My investment has grown by 75% over 3 years. I use these ETF's as a hedge against inflation and the Federal Reserve's printing of money.
posted 7 months ago by Wayne Barbarick from California
Generalities are difficult to comment upon specifically.
posted 7 months ago by Charles from California
