You already know what lots of investors have yet to discover: exchange traded funds (ETFs) are taking the investment world by storm.
A flood of new money from investors, mixed with rising stock prices has driven the value of assets in ETFs up 43% last year. That sent them past a record $1 trillion, reports Walter Hamilton for The Los Angeles Times. Numbers like that keep people asking when ETFs will finally leave mutual funds in the dust. [Are Actively Managed ETFs The Next Big Thing?]
Assets in traditional mutual funds rose only 13% in 2010.
For investors today who have been through a tough 10-year period and say, “I don’t want to underperform the market or pay an extensive amount of fees, all I want to do is perform in line with the market,” ETFs are the perfect vehicle.
Though ETF assets are just a small fraction of the trillions in mutual funds right now, you have to consider a recent study showing that the majority of investors aren’t really aware of ETFs yet.
ETFs have a long way to go to gain market share and pull in enough assets to truly rival mutual funds. If the unaware investors catch on to them, look out: mutual funds could find themselves on the losing end of things.
Tisha Guerrero contributed to this article.
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.