Another round of exchange traded funds (ETFs) are closing, and it’s got some asking if we’re on a death watch.
The short answer is: no. It’s just the nature of things that when you have an industry of 700+ products and growing that some are just not going to grab hold of the consumer, for any number of reasons. It could have been a poor concept, or poor timing or just poor marketing, or anything.
Every industry has its products that landed with a thud:
- New Coke, anyone?
- The Edsel.
- The instant classic comedy "Office Space." It was a flop in theaters, barely even recouping what it cost to make it, but became a huge hit on video. Now, did you get the memo?
- "Maxwell’s Silver Hammer" by the Beatles. Some people really hate this song, but you’ll never hear anyone say the Beatles were done in because of it.
The ETF industry is no exception, and it’s hardly a reason to get scared. ETFs still remain increasingly popular, and financial advisors are recommending them for their clients’ portfolios, say Leslie Scism and Allison Bisbey Colter for the Wall Street Journal.
For an ETF to turn a profit, the Journal says, it generally needs assets greater than $50 million to $100 million. However, some providers may subsidize their smaller funds for years.