Financial Advisor & RIA Center
RIAs and financial planners have unique challenges and opportunities in regards to ETF investing. ETFdb's Financial Advisor and RIA Center is geared towards financial advisors who use ETFs in client portfolios.
In the early days of the ETF industry, the vast majority of funds tracked well-known equity benchmarks, such as the S&P 500, Russell 1000, and Dow Jones Industrial Average. As the benefits of ETFs have become more widely known and understood, the number of issuers and ETFs has increased significantly, and so has the scope of asset class exposure available through ETFs.
Over the past several years, the ETF industry has expanded by leaps and bounds, with new issuers and new funds appearing with great frequency. Equity ETFs have multiplied, offering exposure to stock markets that were previously inaccessible (or at least difficult to access efficiently) for most investors. The following fund launches in recent months highlight the ever expanding scope of equity ETFs:
As ETFs have burst on to the scene in recent years and worked their way into the investing mainstream, the number of products available and complexity of exposure offered has increased significantly. Advisors and investors have taken steps to educate themselves on the ins and outs of ETFs, but many are still scrambling to play catch-up and unaware of the complexities these products can present.
What began as a handful of securities seeking to replicate widely-known stock and bond indexes has grown into a lineup of more than 1,000 funds, offering exposure to nearly every asset class, region, and investment strategy imaginable. While this impressive growth has enhanced the arsenal of securities available to ETF investors, it has also created the potential for misuse and made finding the right ticker symbol a bit more challenging. And while ETFs offer countless potential advantages relative to strategies that revolve around mutual funds and individual stocks, there are some potential pitfalls along path to enhanced cost and tax efficiency. Below, we offer up ten pieces of advice that will help to maximize the benefits of exchange-traded products for all types of investors, including tips on minimizing expenses, avoiding potential pitfalls, and picking the right fund for your portfolio.
The last week has been an eventful one in the ETF industry, and not just for the flurry of new product launches from Vanguard, PIMCO, and WisdomTree. A recent article penned by Andrew Bogan, managing member of a Boston-based asset management firm, caused a surge in anxiety among ETF investors, spreading concerns about the stability of the ETF structure. Bogan’s “research” attempted to delve into one of the less-mentioned differentiating attributes of exchange-traded funds: the ability to sell these securities short, and the potential ramifications of massive short selling of an ETF. The conclusions he reached painted a rather frightening picture for any investors or advisors who use ETFs.
When categorizing various investment vehicles, most investors tend to think of mutual funds and exchange-traded funds (ETFs) as polar opposites. Mutual funds are associated with active management, with a team of analysts and managers seeking to generate alpha by identifying undervalued securities from a relevant universe of stocks and bonds. ETFs, on the other hand, connote a passive investment strategy, products that seek to replicate the performance of a certain benchmark instead of seeking to beat it. For those who believe that active management (or at least certain active managers) add value, mutual funds may be preferred. For those who believe that it is impossible to consistently outperform markets, the lower-expense beta offered by ETFs are more attractive [see Five Advantages of ETFs].
As the ETF industry has expanded at a breakneck pace in recent years, keeping track of all the products out there has become no easy task. There are now well more than 1,000 exchange-traded products included in the ETF Screener, and many of those have hit the market in the last two to three years.