The popularity of exchange traded funds (ETFs) has brought about much debate over their advantages, particularly over traditional mutual funds. Many market insiders and renowned investors, such as Warren Buffett, are still divided over the possibility that ETFs may one day supplant the old-fashioned mutual fund.
To be clear, there are not any innate problems with ETFs, and their creation was in direct response to an unmet market demand. Much of the debate about problems with ETFs actually stem from concerns about how investors might be using them. Motley Fool points out that just because these funds can be traded at every minute of the trading day, doesn’t mean you should actually be doing it that often.
That’s Warren Buffett’s concern. Berkshire Hathaway’s (BRK-A) chairman suggests that traditional index mutual funds are more appropriate for most investors because there’s less pressure to engage in frequent trading. He’s not alone in his thoughts. Vanguard’s index pioneer Jack Bogle once called ETFs “mutant” indexes that only encourage performance chasing and shoot themselves in the foot.
Hey, guys. Give investors a little credit.