New ETFs Bring New Cautions | ETF Trends

2006 was record breaking year for exchange traded funds (ETFs) and there are more promising numbers for this year. A record 156 ETFs launched in 2006, with assets up 38% to $417 billion. January of this year showed a rise of $5 billion alone and 28 new ETFs launched in the month. As of now, 300 new ETFs are waiting in the pipeline for the SEC’s approval. Due to the oncoming flood of new ETFs there are a few facts Richard Moroney of Forbes wants you to consider:

  • The little-known designer index isn’t necessarily a bad investment, they are niche investments and shouldn’t be viewed as core holdings;
  • Back-tested histories must be scanned with a skeptical eye, as some cover a relatively short time span and are no indication for the future;
  • More specialized ETFs could mean higher expense ratios;
  • Taxes- the verdict is not out yet. Most of the older ETFs are tax-efficient but the funds built around newer indexes may get you on the capital gains.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. 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.