Many investors are utilizing exchange traded funds to capture broad or focused market exposure. As ETFs gain a wider following, it is important to take a step back and fully understand the asset class.
Money managers are quickly expanding the ETF universe with new, more sophisticated products, but they are also ramping up investor education. For instance, State Street Global Advisors, the company behind the popular SPDR ETFs, launched the ETF Ed, a new curriculum at the SPDR University.
“With the ETF universe expanding rapidly, investors have questions about trends and how new products can be applied and implemented in a portfolio,” Jim Ross, executive vice president and global head of SPDR ETFs at SSgA, said in a press release. “What is revolutionary about ETF Ed is that it evaluates where the knowledge gaps are for the investment professional and creates a very customized syllabus that helps fill those gaps. It is self-paced and designed to guide the user through various lessons to develop and strengthen their ETF expertise. It’s a resource that’s unlike any other in the industry.”
The topics covered in the program include total cost of ownership, index methodology, liquidity, asset allocation and product structure. While many investors may have a broad understanding of these terms, there are some subtle nuances that many gloss over.
For instance, total cost of ownership can include explicit costs like the annual fees or expense ratio, but it can also include implicit costs like the ETF’s bid/ask spread, brokerage fees and premium or discount to the net asset value. [Index War Lowers ETF Fees; Investors Win]
The industry has come a long way from traditional beta-index ETFs. Instead of weighting stocks by market capitalization, ETFs now track fundamentals or factors in so-called smart-beta indices. [What to Look for in ‘Smart-Beta’ ETFs]