It seems as if exchange traded funds (ETFs) are continuing to outshine mutual funds. The number of mutual funds that received the highest possible stewardship grades from investment research provider Morningstar dropped. At the same time, the number of mutual funds that received the lowest grades increased as a result of the company’s Sept. 25 revision of its grading system to impose new, tougher standards, reports David Hoffman for Investment News. Since 2004, Morningstar has evaluated mutual funds to assess how well fund managers and fund companies meet their shareholders’ expectations.

The mutual funds’ new grades aren’t the only indication they’re in trouble. In 2000, there were about 11,000 mutual funds. Today, there are only about 8,000. Each year 300 to 500 mutual funds disappear either because of poor performance or they merged with another fund. In contrast, the number of ETFs increases practically every day. Earlier this year, a little more than 500 ETFs existed. Now that number is up to more than 550 with a total of $566 billion in assets.

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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