Do you think exchange traded funds (ETFs) will ever replace the mutual funds’ place in the industry?
There are plenty of people who aren’t so sure, and believe it or not, we’re among them.
There have indeed been a number of mutual funds that have been consolidating and closing in recent years, but mutual funds have been around for decades and they’re a household name. There are trillions of assets in them, and they outnumber ETFs by a long shot.
While we feel ETFs are by and large superior to mutual funds, ETFs still have a lot of catching up to do in terms of their numbers, assets and familiarity. ETFs only have 5% of the assets mutual funds do. But one can’t argue with the fact that 80% of mutual funds underperform their benchmarks over time.
While the industry will continue to grow, it is unlikely they that they’d ever replace mutual funds entirely. That hasn’t stopped a growing number of advisors and individual investors from incorporating them into their portfolios.