ETFs Gaining on Traditional Mutual Funds, Study Finds

Exchange-traded funds are becoming a serious threat to traditional mutual funds, a trend that will gain pace over the next few years.

That’s the word from Financial Research Corp. of Boston, Mass, which is releasing a study on ETFs today (Monday). In a survey of financial advisers, FRC found that 71% of the advisers it polled used ETFs in 2008, up from just 25% in 2003.

ETFs, which are baskets of securities that trade on a stock exchange, have grown in assets at a more rapid clip than index funds in the last several years. Over that same period, traditional, actively-managed mutual funds have fallen in assets. Consider this: for every $100 invested in 2001, $90 went into mutual funds, $8 went into index funds, and $2 went into ETFs. Fast-forward seven years: By the end of 2008, the share of mutual funds fell to around $81.5, while index funds attracted $9.5 and the remaining $9 went into ETFs.

FULL STORY: http://blogs.wsj.com/wallet/2009/04/13/etfs-gaining-on-traditional-mutual-funds-study-finds/