How to Safely Navigate Through Crowded ETF Waters
by David Fry
I once interviewed a successful exchange-traded fundsponsor 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
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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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