Lipper ranks the best and worst performing funds, and this year exchange traded funds (ETFs) really popped on the radar. Four years ago, ETFs did not show on the "Leaders and Laggards" charts. However, during the first four months of 2007, 18 of the 60 funds were ETFs: 10 winners and 8 losers, reports Diya Gullapalli for The Wall Street Journal.
The 10 winners show that ETFs are a hot investment vehicle, and the eight losers illustrate some are vulnerable. The study also implies that ETFs and mutual funds are moving in opposite directions. The newer ETFs are focusing on diverse sectors and sub-sectors that have a narrow and limited focus, whereas mutual funds are spanning the asset allocation board, investing in big sectors and life-cycle funds.
The narrow focus of ETFs isn’t necessarily bad. It can lead to extreme returns, both positive and negative. The broad array of ETFs can fill gaps in investors’ portfolios in a way traditional mutual funds cannot. When researched and used correctly, specialty ETFs can tap into an area of the market previously unavailable.
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.