But it should be noted that because of their diversified nature, ETFs are less responsive to market fluctuations in the short-term. This can appeal more to long-term investors seeking more liquidity, but in truth, they work for any type of investor and can fit into any investment strategy.
Investors are also finding ways to make money, even in down market. There are a number of long and short ETFs available, and they’re learning how to incorporate them into their overall strategy, making them especially popular in the recent market downturn.
Investors have dumped $74 billion out of mutual funds in all categories last month alone, says Trang Ho for Investor’s Business Daily. Year-to-date, a net $199.37 billion has come out of mutual funds and a net $83.6 billion has gone into ETFs.
As more and more investors flock to exchange traded funds, it is no wonder that about $400 billion in net cash flow has found its way into ETFs since 2005, writes Murray Coleman for Index Universe.