Toward the end of 2010, the exchange traded fund (ETF) industry hit the $1 trillion milestone. That may have been the toughest milestone of all.
Nathan Hale for MoneyWatch reports that comparing the growth of the ETF industry with the growth of the mutual fund industry results in some telling figures:
Since 2000 ETF assets have risen from $65 billion to $1 trillion — a 31 % annual growth rate. In that same period, assets in long-term mutual funds have risen from $5.1 trillion to $9 trillion, growing at 6% a year.
While it’s unrealistic to expect that the ETF industry will grow 31% every year for all time, the growth it’s seen in this time span is a harbinger of the good things yet to come.
The next trillion could well come from all-ETF 401(k) plans as more providers offer them. The mutual fund industry has a stronghold on the market for now, but high fees, poor performance and offerings that are said to be average at best could put them out of favor – and usher in a new era for ETFs.
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.