1. ETFs are eating everything.
The revenge of John Bogle continues apace. As investors figure out that they are not good at stock-picking or managing trades, they have also learned that most professionals are not much better. Paying high mutual fund expenses to a manager who underperforms a benchmark makes little sense. This realization has led to the rise of inexpensive exchange-traded funds and indices.
This “ETFication” has obvious advantages: low costs, transparency, one-click decision-making. ETFs are accessible through the stock market for easier execution, with no minimum investment required. Even bond giant Pimco recognized this trend and created an ETF version of Bill Gross’s flagship vehicle, the Total Return Fund. Pimco actually charged more for the ETF than its mutual fund to prevent an exodus of investors from the world’s largest bond fund. This will eventually shift.
~ Barry Ritholtz, from 10 trends to watch in finance for 2013
Monday, January 14, 2013
Quote of the Day: Barry Ritholtz
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I'm a fan of Ritholtz. I do have to say that Wall Street is once again taking a great product and allowing its greed to takeover. Highly leveraged ETFs will one day cause big problems.
ReplyDeleteI'm not sure Bogle would agree completely with Ritholtz on this one. Bogle would prefer the buy and hold low-cost index fund to the ETF. ETFs are another potential trading vehicle for Wall Street, and are open to typical Wall Street abuses. I myself own ETFs in my personal portfolio, but I'm a buy and hold guy, not a trader.
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