The exchange traded fund (ETF) industry has grown considerably in the last 10 years. The currently available ETFs offer a wide range of investment opportunities. While not every fund may be right for you, does it justify criticism of the industry at large?
ETFs are used by more and more entities: institutional investors who use ETFs to invest new money quickly or hedge existing positions, financial advisors who use ETFs to create low-cost portfolios for clients, respected educational endowments and average investors who use them for long- or short-term trades, remarks John Waggoner for USA Today.
It’s no wonder, since ETFs offer a low-cost way to put money into stocks, bonds, commodities and real estate, and ETFs offer a way to bet on a segment of the market without having to deal with volatility in individual stocks.
The industry is not without its critics, though. ETF investors should be wary of the looming pitfalls associated with the investment vehicle. “Sometimes the temptation to trade overcomes investors’ common sense,” remarks Jim Lowell, founding editor of the ETF Trader.