The chaos in the stock markets this year is causing a shift in the mindset of investors and changes among products in the industry, and exchange traded funds (ETFs) may have a golden opportunity.
Vanguard and Fidelity are the heavies within the mutual fund industry, but things are changing.
John Waggoner for USA Today reports that the Vanguard 500 Index was the largest stock fund five years ago, touting $88.9 billion in assets, spanning three share classes, and today, the total is at $80.7 billion, a marked drop.
Other big changes: the largest fund company is no longer Fidelity – it’s Vanguard. And the largest mutual fund is no longer the American Funds’ Growth Fund of America – it’s Fidelity Cash Reserves, a money fund.
Only a small amount of growth remains in the fund industry collectively, and only two companies have seen their assets rise: ProFunds and Pimco. According to Lipper, 560 funds have been shown the door, compared with 498 last year.
Can mutual funds recover? It doesn’t look good, as investors have been burned pretty badly with shocking losses to their portfolios this time around. Add to this the coming fee hikes and the capital gains distributions that will be slapped onto investors in April, and this could be a new beginning for ETFs.
Ultimately, the bear market may have carved out a new landscape for the actively managed mutual fund and the ETF, with the latter seeing greener pastures.
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.