6. Schwab will launch an ETF supermarket. Schwab pioneered the idea of the mutual fund marketplace in 1984, giving investors an easy and economical way to invest in mutual funds. In 1992, Schwab launched the industry’s first no-load, no-transaction-fee mutual fund supermarket, which pulled in $8 billion in its first year. We predict that Schwab will do the same thing for ETFs in an effort to become a bigger player in the space. Its mutual fund marketplace is a successful idea it may want to replicate. [Schwab’s ETFs could open doors.]
7. The Federal Reserve’s interest rate hike will catch fixed-income ETF investors by surprise. Interest rates are now at record lows. While Federal Reserve Chairman Ben Bernanke has stated that the central bank intends to keep rates low for sometime in order to stoke economic growth, what goes down must eventually come back up. And when rates do go up, long-term bond ETF holders could be surprised. [Do bond ETFs work as they should?]
8. Global ETF offerings will expand. This year, it became more clear than ever: For an investor to see real portfolio performance, there needs to be some serious international allocation. Two-thirds of the world’s market cap is outside of the United States. That’s a number investors can’t afford to ignore. Fortunately, it doesn’t seem as though they are: As of November 2009, net inflows into long-only international ETFs stood at $29 billion; in November 2008, that number was $9 billion. ETF providers will take notice of the increasing international interest and launch new ETFs accordingly. [6 things you’re missing by not investing globally.]
9. We’ll see more creative uses of ETFs: life cycle funds, ETFs of ETFs, separately managed accounts. Many of the major ETF asset classes and sectors have been covered: micro-cap on up to mega-cap, technology, real estate, consumers, financial, just to name a few. Since the basic portfolio building blocks are now in place, look for providers to begin using existing ETFs in more creative ways: life cycle funds for those thinking about retirement, more funds-of-funds and ETFs being employed in separately managed accounts. [New ETFs that launched this year.]
10. Emerging market ETFs will be at the top of the performance charts for 2010. Globally-focused ETFs, especially those aimed at emerging markets, caught on fire this year. Some of the top-performing funds of 2009 include ETFs tracking Russia, Brazil, India, Latin America, Turkey and China. As the global economic recovery continues, developed markets will begin to spend more, emerging markets will see their own internal consumption grow and we’ll experience a mutually beneficial relationship that could put these countries at the top again in 2010. [Finding rewards in emerging markets.]