As investors become better educated and aware of the vast array of investment tools they have at their disposal, exchange traded funds (ETFs) continue to be a popular choice.
Over the past 10 years, the total assets allocated to ETFs have grown a whopping 15-fold, from $39 billion to $593.3 billion, and now account for nearly 25% of all trading volume in U.S. markets, states David Oakley of the Financial Times. Many believe that this massive inflow of assets came from the mutual fund world.
ETFs have drawn attention because of their underlying characteristics. With the demise of Lehman Brothers, the crumble of the financial markets and the fraud committed by prominent money managers, the transparency that ETFs offer have made them a winning choice among many investors. Additionally, as ETFs become more popular and as average investors start taking more action and educating themselves on money management, the other favorable characteristics of ETFs become apparent.
For those of you who are new to the ETF world, they are known for their ability to enable investors to grab exposure to traditionally unreachable markets and sectors, their low costs, their tax efficiency and ability to traded on an open market. For more benefits and characteristics of ETFs, check out our guide to ETFs.
This trend of asset inflows into ETFs will most likely continue and take the market to the trillion dollar mark. ETF providers continue to launch new ETFs and 401(k)s are starting to finally utilize the versatile tool. If, and when, you start utilizing ETFs, we suggest you use our ETF analyzer to watch performance and find the ETFs that you deem a perfect fit for your portfolio and your goals.
Kevin Grewal contributed to this article.
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.