The selection of exchange-traded funds is exploding, and this is great news for you. Why? Because a bigger selection means more choices as well as more competition. That leads directly to lower fees and trading costs.
Today I’m going to give you an update on the ETF landscape. As you’ll see, it’s changing by the day.
A Trillion Dollars in ETFs
Since I track the statistics in ways no one else does, I think I have the most comprehensive ETF database in the industry. By my count, there were 1,124 U.S.-listed ETFs and exchange-traded notes (ETNs) at the end of last month.
In those 1,124 products were total assets of $1.02 trillion. Yes, trillion! ETF assets are still lower than conventional mutual funds, but the gap is shrinking. ETFs are superior in so many ways I won’t be surprised if the proportions flip within a decade.
Here are just a few of the reasons that ETFs are the investment of the future …
- Liquidity: ETFs can be bought and sold any time the stock markets are open. No need to wait until end of the day.
- Transparency: Unlike mutual funds, ETF sponsors aren’t allowed to hide the details of their portfolio holdings. You get to know exactly what you are buying — and you don’t have to wait weeks or months to know it.
- Low costs: ETF management fees are almost always lower than comparable mutual funds.
More important, ETFs give you versatility and access to market segments that are very difficult for average investors to buy otherwise. Here are just a few of the categories in which ETFs and/or ETNs are now available:
- Micro Cap
- Socially responsible stocks
- Industry sectors
- Emerging markets
- Frontier markets
- Treasury bonds
- Municipal bonds
- International bonds
- Agricultural commodities
- Foreign currencies
For many of these categories, you can also trade leveraged and inverse ETFs. Of course you have to use these tools correctly — but at least the tools exist now. Just a few years ago, they didn’t.
New ETFs by the Dozen!
New products are coming out at a record pace as sponsors expand their menus into new niches. Just so far this year, I count 25 new ETFs and ETNs. Here are a few of the most interesting new alternatives …
- Teucrium Natural Gas Fund (NYSE:NAGS)
- ETFS Physical Asian Gold Shares (NYSE:AGOL)
- Global X Aluminum ETF (NYSE:ALUM)
- RBS U.S. Mid Cap Trendpilot ETN (NYSE:TRNM)
- AdvisorShares Active Bear ETF (NYSE:HDGE)
- Global X FTSE Andean 40 ETF (NYSE:AND)
- ProShares UltraShort TIPS (NTYSE:TPS)
Now I’m not saying you should rush out and buy any of these. I list them here simply because they are new and different. They illustrate the kind of innovation that is underway in the ETF world.
[Editor’s note: To help you profit from ever-changing global market conditions, identifying which ETFs have the most potential at any given time, check out Ron’s International ETF Trader.]
Where is it all leading? Every time I think the possibilities are all covered, the ETF industry confounds me with something new. Their creativity seems to know no bounds. I can’t wait to see where we are five years from now!
Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Nilus Mattive, Claus Vogt, Ron Rowland, Michael Larson and Bryan Rich. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Andrea Baumwald, John Burke, Marci Campbell, Selene Ceballo, Amber Dakar, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.
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