As the exchange traded fund (ETF) industry expands, innovates and offers investors more choices than ever before, it also will require those who buy to be more thoughtful in their research.
In this day and age, investors and issuers are highly aware of the role that ETFs can play for the entire investment community. A large number of the new ETF products are in the pipeline, and it is now more important than ever for issuers to be aware of what works and why, reports Don Dion for The Street.
It’s also more important for investors to explore the new offerings a little more, especially as they veer toward the more exotic side. Investors will need to consider what works for them and whether a position is right for them in the first place. Some, for example, have jumped into fixed income and commodity funds without fully understanding how they operate.
Some of the latest developments:
- Proprietary ETFs. Schwab, State Street, Vanguard and Fidelity are likely to offer similar lines of proprietary ETFs in the near future, Dion notes. State Street and Vanguard are well into the process.
- Large firms jumping in. BlackRock‘s recent purchase of iShares has upped the ante.
There are two major things that may happen with the glut of ETF products streaming to market:
- Fees will be driven down because of increased competition.
- The drawback will be some flawed strategies that will result in funds dissolving. This is simply going to create an even better ETF environment and product for investors in the long run, however. Not every product can be successful, no matter what industry we’re talking.
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.