The fallout of the stock market may actually be a path for exchange traded funds(ETFs) to really get a foothold within the investment community, causing a shift in the approach to traditional investing and asset allocation.

Marla Brill for Financial Advisor Magazine says that the latest product innovations and the wave of popularity of ETFs that touched down on alternative investments actually closed the gap between falling stock prices. It gave these funds a more permanent status in the investment world, a step up from niche status.

The overall popularity of the ETF gave way to an increase in assets overall in a variety of funds, including commodity funds, currencies, leveraged and short ETFs and the actively managed fund. In fact, in 2009, assets in inverse and leveraged ETFs saw the biggest jump, by 106% from the beginning of the year through the end of the third quarter.

These funds took the next step toward the overall shift in the construction of cookie-cutter asset allocation strategies. Until recently, most people didn’t have the time or the expertise needed to gain exposure to anything beyond fixed income or traditional equities.

Now it’s easier to diversify within alternative investments, and people are shifting away from the old-line asset allocation models and exploring other options.

The next year should prove to be advantageous for ETFs, and their providers will need to keep their lineups and products top-notch to capture the market. ETFs could be giving the traditional mutual funds a run for their money. In fact, they already are.

Tags: Commodity ETFs, Mutual Funds