Will exchange traded funds(ETFs) ever be able to overtake the mutual fund industry? If you have to ask, that’s a good sign. ETFs are fast becoming a formidable opponent to mutual funds, but whether they’ll ever surpass that industry’s size is another question altogether.

Mutual funds have a 69-year head start over ETFs. As ETFs gain popularity and start to maximize their profit-making ability, the race is on for a sizable piece of the market share that mutual funds currently enjoy.

Daniel Tovrov for Mutual Fund Wire reports that there are several ways in which the ETF industry could become even more competitive with the mutual fund industry:

  • Earning new capital is akey component in determining whether ETFs will remain competitive
  • ETFs that stick to less exotic and esoteric indexes could have a greater chance of success
  • Cost is a factor; investors are going to want more bang for their buck
  • Funds with a long-term focus could attract investors who find a buy-and-hold strategy appealing

The ETF industry isn’t going to take over the mutual fund industry anytime soon – mutual funds are a $12 trillion behemoth. But the rapid growth seen in ETFs have them on the right track.

For more stories about mutual funds, visit our mutual fund category.

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.

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