Investors are turning to exchange traded funds as they offer an inexpensive way to get returns on indexes – which tend to perform better than actively managed mutual funds.  The ETF market has been growing quite rapidly in the past 10 years.  According to Investment Company Institute, assets have grown from $1.05 billion in 1995 to $296 billion in 2005.

ETFs track indexes and new indexes are created for ETFs to track.  Fundamental indexes are the latest and the two big creators are Wisdom Tree Investments and Research Affiliates LLC.  As these indexes are new, investors only have back-tested data to go on, which might not be as reassuring as actual data.  But the longer these indexes are out there, the more actual data investors will see.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.