I admire both Buffett and Bogle for their contributions to investing over many years. But these guys should embrace innovation. The principles that Bogle and Buffett stand for (value, choice, service) are all wrapped into ETFs. I find their criticism of ETFs a little self-serving. Maybe those who have been able to maximize the benefits may no longer need their sage advice.
There’s no doubt there are investors out there who are using securities (whether it’s ETFs, stocks or futures) in a way that can hurt them. But you also need to give investors a little credit – the vast majority of them are educated and responsible. ETFs are just another tool for investors to use; it’s up to them to get the necessary education. These days, that’s easier than ever. And if they don’t take care to do research and understand where they’re investing, it’s a lesson they’re going to have to learn on their own.
ETFs work seamlessly with a trend following discipline that has you entering and exiting the markets based on technical signals instead of gut feelings. By doing that, you should be able to cut down on frequent, willy nilly trading that racks up big fees. Investors need not assume that all ETFs are automatically low-cost, and research should be done concerning cost, tax issues and liquidity.
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