Exchange Traded Funds started out as a sort of novelty. They were very high value, sometimes as much as $200 per unit, and they were considered "boutique" investments. Now, they're the financial equivalent of home insurance, a nice easy to manage nest egg investment with a lot more stamina than mutuals and basic stock investment.
The changing investment market
ETFs are as much a cultural shift as a change in investment patterns. The traditional stock market has hit a point of becoming a bit too detailed. Investors want returns, not to spend years studying the theory and practice of stock investment. ETFs, because they include baskets of stocks, are a style of investment which is really based on subjective performance of funds.
The logic is simple enough:
ETFs also got hit, but there were some surprises. The mortgage security ETFs, for example, took the full wallop of market reaction, their prices plunged, only to rebound just as quickly. The market discovered that the mortgage security ETFs were holding prime AA and AAA securities, not the garbage foisted on the market.
(Citigroup, when given its bailout money, cherry picked a lot of these securities, and got itself out of trouble in 12 months.)
The evolution of the ETFs
The ETFs have evolved into good traders as well as stronger investment options. The prices of the old high value ETFs deteriorated thanks to the GFC, but have reemerged as good traders, so popular they trade in millions of units per day. The new generation of ETFs are obviously slanted to trading values, with major league banks like Deutsche Bank opening a raft of ETFs on the DAX and even the mutuals starting to look at opening up their own ETFs.
This has happened largely because the ETFs have been pulling money away from the mutuals and other forms of investment. There's now at least a trillion dollars under management in ETFs in the US alone, and that volume is mainly the result of recent investments.
ETFS pay dividends, do unit splits, and perform according to consistent financial practices. They've become the equivalent of contents insurance for investors, because their real values are clearly defined on a daily basis, not based on market hype. They perform relative to indices and do what good investments are supposed to do- Build value over time.
The changing investment market
ETFs are as much a cultural shift as a change in investment patterns. The traditional stock market has hit a point of becoming a bit too detailed. Investors want returns, not to spend years studying the theory and practice of stock investment. ETFs, because they include baskets of stocks, are a style of investment which is really based on subjective performance of funds.
The logic is simple enough:
- ETFs invest in a specific area of the market.
- They're weighted to achieve particular results.
- Their performance is transparent, because of their structure.
- Their fees are transparent, advertised by prospectus.
- They can be bought and sold in real time.
- They can be compared against other funds and the indices as well.
- They're good traders in many cases, with very high volumes and good price moves over trading periods.
ETFs also got hit, but there were some surprises. The mortgage security ETFs, for example, took the full wallop of market reaction, their prices plunged, only to rebound just as quickly. The market discovered that the mortgage security ETFs were holding prime AA and AAA securities, not the garbage foisted on the market.
(Citigroup, when given its bailout money, cherry picked a lot of these securities, and got itself out of trouble in 12 months.)
The evolution of the ETFs
The ETFs have evolved into good traders as well as stronger investment options. The prices of the old high value ETFs deteriorated thanks to the GFC, but have reemerged as good traders, so popular they trade in millions of units per day. The new generation of ETFs are obviously slanted to trading values, with major league banks like Deutsche Bank opening a raft of ETFs on the DAX and even the mutuals starting to look at opening up their own ETFs.
This has happened largely because the ETFs have been pulling money away from the mutuals and other forms of investment. There's now at least a trillion dollars under management in ETFs in the US alone, and that volume is mainly the result of recent investments.
ETFS pay dividends, do unit splits, and perform according to consistent financial practices. They've become the equivalent of contents insurance for investors, because their real values are clearly defined on a daily basis, not based on market hype. They perform relative to indices and do what good investments are supposed to do- Build value over time.
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