Exchange traded funds are a basket of stocks that follow an index. For example, the iShares S&P 500 Index (IVV) seeks investment results corresponding to the S&P 500 Index. Merrill Lynch has now come up with a report indicating that investors should consider using index investment strategies. Ignites reviews the report, "Is It Time to Index" that concludes market conditions are making it increasingly more difficult for managers to beat the market. With a decreasing number of stocks within the S&P 500 outpacing the return of the index, active portfolio managers will have a harder time finding stocks that will beat the market.
The study maintains that market breadth is the factor that determines the success or failure of active management. But it is only one factor.
This report helps support the use of ETFs in an investors portfolio, since as of yet, there are no actively managed ETFs.
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.