Todd Rosenbluth of S&P Capital IQ noted in a recent interview with Mark Jewell for AP that the number of index ETFs launches may continue to decline because it is hard to differentiate these products. There are already a few successful ETFs trading that track the S&P 500 with much success; the SPDR S&P 500 (NYSEArca: SPY) and the iShares Core S&P 500 (NYSEArca: IVV). The need for another such ETF is simply not there. [Equal Weight ETF Consistantly Outperforming the S&P 500]
Another hot topic in the ETF industry has to do with commission-free ETF trades. Rosenbluth stated the aspect of free trades pertains only to those investors who trade frequently. A free trade is more important when there are several transactions in a day, but a buy-and-hold investor who invests through a financial advisor is already paying a commission, so the question really boils down to ETF quality and if it is performing well.
Investors should not be fooled by a commission-free trade. If the ETF trades for free, it doesn’t mean that it’s worth it. The fund may not be a good tool, and a free trade could just be a selling point for an underperforming ETF. [What to Look For in a Core ETF Investment Portfolio]
Tisha Guerrero contributed to this article.
Full disclosure: Tom Lydon’s clients own SPY.