If recent trends continue, could exchange traded funds (ETFs) replace mutual funds the same way cassette tapes shadowed CDs? Investors have been putting a great amount of cash into ETFs, hedge funds, and managed accounts that feature assets like commodities and private equity.

Jesse Emspak for Investor’s Business Daily reviews the mutual fund and ETF industries, pointing out why ETFs have become so popular and where the money is flowing.

  • The broad-market index ETFs are cheap alternatives to passively manged index funds;
  • There is an increasing amount of ETFs available to investors in a myriad of choices;
  • While ETFs incur a commission when traded, their recurring expenses are lower than mutual funds;
  • ETFs can be traded throughout the day like individual securities.

And what about the debate?

  • Should there be actively managed ETFs;
  • ETFs need a grand entrance into 401k plans;
  • Do ETFs pull investors away from long-term investing?

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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.

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