Exchange traded funds (ETFs) are a good alternative to traditional index mutual funds. Bruce Bond of PowerShares Capital Management LLC, says it’s only the beginning for ETFs. He contends that traditional indexing is flawed because the well-known benchmarks rank stocks according to market value or capitalization. There is undue risk for the investor because the biggest stocks dominate the index regardless of investment or business merit. PowerShares base their stocks on underlying fundamentals such as earnings, dividends, cash flow and market share.

Bond states indexes were made to measure the market, but they’re not the best for investing. He focuses the company’s ETFs on "intelligent" indexes, fundamental indexes and indexes that provide access to areas with familiarity but only decent exposure to them. Jonathan Burton for MarketWatch says its ultimately up to distribution and support.

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.

Subscribe to our free daily newsletters!
Please enter your email address to subscribe to ETF Trends' newsletters featuring latest news and educational events.