FYI: (This is a follow-up article)
A few weeks ago I took the other side of the phenomenal growth in index funds by playing devil’s advocate on some of the problems with this growth. A few people asked me to expand on one issue in particular:
“Index” can be a subjective term. Most of the money is going into traditional index funds that track something like the S&P 500 or a total market fund but there is plenty of money going into products that are index in name only. The number of choices now available in ETFs and index or index-like products can be overwhelming and many are meant to be sold, not bought. Our brains don’t function very well when faced with an ever-increasing number of choices. The temptation to make a change to your portfolio has never been greater.
One of the reasons many funds can be considered an index in name only is because they have a hard time tracking the actual index. Sumit Roy wrote a piece for ETF.com last week that aligns nicely with this idea. He wrote about the VanEck Junior Gold Miners ETF (GDXJ), which tracks the MVIS Global Junior Gold Miners Index.
Regards,
Ted
http://awealthofcommonsense.com/2017/04/when-an-etf-changes-its-stripes/Sumit Roy ETF.Com Article:
http://www.mutualfundobserver.com/discuss/discussion/32475/popular-gold-miner-etf-to-change-dramatically#latest
