Michael Krause doesn’t like to think about the past. The founder of the ETF Research Center has built his business on the idea that it’s all about looking forward.
In the “old days,” investors and advisors analyzed mutual funds by looking at the managers: who they were, their track record, how well they had performed in recent months or years. In other words, the analysis was all focused on the past.
“When you’re looking at a mutual fund, you’re rating the manager of the fund. It’s important to look at past performance,” he says. Krause wants to move away from that.
Thanks to the transparency of exchange traded funds (ETFs), he believes there’s no reason to look anywhere but toward the future to make the smartest decisions for yourself or your clients.
Most ETFs passively track an index and thus lack a stock-picking manager. Krause explains the difference this way: If your fund manager had ridden the financial sector to the bottom, perhaps you’d have a case that the manager wasn’t earning his or her keep. But if the financial ETF sinks, it’s because the index sank, too. For that reason, it’s better to look at the holdings of the ETF to bring the big picture into focus.