The exchange traded fund industry is going mainstream, with prime time commercial advertisement spots and recognition by most individual investors. As the number of ETFs trading keeps growing and the assets under management keep multiplying, many are calling this time an “ETF boom.”
“As we approach the halfway point of 2012, we are on track for yet another period of tremendous growth for the line up of ETFs. More than a hundred new funds have begun trading already this year, and dozens of issuers continue to plan aggressive expansions of their product lineups,” Michael Johnston for ETFdb.com wrote. [Why Institutional Investors are Using ETFs More]
According to the ETF Industry Association, at the end of May, ETFs accounted for more than $1.14 trillion, an increase of 2% from the month before. There are now 1,465 ETF products trading, up from 1,254 one year ago, reports David Francis for US News.
Institutional investors have been keen on ETFs for some time. It has become apparent that ETF providers are now targeting individual retail investors. The ETF has become an important asset allocation tool, but only for those that really understand how they work and what they are tracking. [The 10 Best Selling ETFs of 2012]
The recent growth in the ETF industry is indicative of the need for investor education, especially for the retail investor.
“My sense is that the education of the retail investors on what are ETFs and what are their choices is an evolving process,” Tom Graves says. ” ETF providers and financial advisers are talking to their clients about the choices out there, and it’s not surprising to me that there is a media presence for ETFs in terms of advertising. The market is becoming increasingly competitive.” [ETFs and Tactical Asset Allocation]
What many ETF professionals want to avoid is retail investors getting caught up in investments that they don’t understand. Education must be made accessible so that investors can understand how fancy ETFs work and what the risks are before they jump in.
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.