My investment colleagues… both online and offline… have been responding to the mainscream media’s condemnation of ETF proliferation. (Just the way I wrote that… I feel like I am engaging in combat!)
In 2005, you may have had 200 ETFs to discuss, while 260 more were likely introduced in 2006. There are approximately 500 today, with another 260 in the 2007 pipeline.
At first, it may be easy for some to denounce the popularity and… dare I say it again… proliferation of ETFs. Yet few of these same malcontents seem as distressed by the 10,000 mutual funds that the public currently sifts through.
The point here is that, basic laws of supply and demand are at work. Investors are demanding ETFs because they represent the best way to get exposure to stocks, bonds, currencies, commodities and a host of investment alternatives.
Granted, not every ETF is needed; some are downright gimmicky. Yet index funds that trade like individual securities give you the best of both worlds; you get the best of individual issues and the best of traditional mutual funds. The change should be welcomed, not feared.
I agree with Carl Delfield who recently wrote:
“Choosing from a menu of 800 ETFs is a daunting task. My advice is to choose no more than three or so ETF families and a universe of no more than 100 ETFs. Don’t jump on each new ETF or your portfolio will look like it did before you switched to ETFs – a mess of 100 individual stocks with no strategy or coherence.”
Disclosure statement: Some of Pacific Park’s investment clients may hold positions in any of the investments mentioned above.