One reason the exchange traded fund business is growing so quickly is that the financial products appeal to many different types of investors. For example, traders like the ability to buy and sell ETFs during the day, while buy-and-hold investors are drawn to their low fees and indexed approach.
“Low dealing costs and the expectation of being able to buy or sell throughout the trading day at a known price more or less in line with the value of the underlying assets are the main attractions of ETFs for traders,” writes Pauline Skypala at the Financial Times. “Low charges on the funds themselves are an additional plus point.”
In the U.S., retail investors account for about 50% of the ETF market, according to estimates.
“That is big business, and U.S. providers are fighting for market share, using fees as the battleground,” Skypala reports.
BlackRock (NYSEArca: BLK) recently announced fee reductions at its ETFs and created the new iShares Core Series targeting long-term investors. Also, Charles Schwab (NYSE: SCHW) and Vanguard have slashed expense ratios at their ETF lineups.