Investors appear to need additional assistance due to the rapidly increasing number of investment choices.
From Matt Levine's Money Stuff newsletter:
"Thanks to a breakneck pace of new launches, there are now more than 4,300 exchange-traded funds,
a figure that for the first time eclipses the total number of stocks, currently hovering around 4,200,
data compiled by Morningstar shows."
“'There’s an ETF for everything now — AI, pets, cannabis, woke and anti-woke portfolios,' said Boneparth.
'It’s hard to tell whether you’re investing in something meaningful for the long term or you’re filling out
an online quiz for Buzzfeed.'”
"This has helped convince many people that they need outside help.
The share of self-directed investors — meaning those who are making their own investment selections —
has dwindled to 25% in 2024 from 41% in 2009, according to data from researcher Cerulli."
Comments
https://ybbpersonalfinance.proboards.com/board/12/weekly-business-digests
My summary from Weekend Business Digest 1:
"COVER STORY, “ETFs Are Eating the World. The Right – and Wrong – Ways to Invest”. It’s hard to imagine an investment idea or theme without a related ETF. There are 4,000+ ETFs in the US, 700+ were added just in 2024, and several hundred are pending before the SEC. Note that there are only 2,400 listed stocks in the US (but there are many ETFs for single-stocks). Many mutual funds/OEFs are adding ETF classes after Vanguard’s patent expired in 2023. Almost 1,300+ active ETFs are competing with active OEFs. Many new ETFs won’t survive because viable ETFs need $100+ million AUM. There have been strong inflows, and the total ETF AUM is $11 trillion, and almost 33.3% of all listed funds (OEFs, ETFs) excluding the money-market funds (CEFs are too tiny to move the needle). Lot of money is just shifting from OEFs into ETFs.
The ETFs has several advantages: (i) tax-efficiency (due to tax-free creation/redemption), (ii) accessibility, (iii) trading convenience, (iv) lower ERs; big ETFs are very liquid. Many financial advisors now prefer to use ETFs for asset allocation. On the other hand, there is more temptation to trade and reinvestments are inconvenient.
Top 4 ETF sponsors/firms (Vanguard, BlackRock/BLK, Invesco/IVZ, State Street/STT) have 82% of the total ETF AUM, so there is lot of noise out there. Major stock ETFs are SPY, IVV, VOO (SP500); RSP (equal-weight SP500), IEFA (EAFE), VT (total world stock), NOBL (dividend Aristocrats), TCAF (capital appreciation), etc. Major bond ETFs are AGG, BND (US aggregate bond); BNDW (total world bond), MUNI (intermediate-term munis), JCPI (inflation-protected), ANGL (fallen-angle HY), etc. Major alternative ETFs are GLD, GLDM (gold bullion); IBIT, FBTC (spot Bitcoin), etc.
There are flaws in some of these ETFs. Some bond, private-asset and commodity ETFs are in small, fragmented and illiquid markets that trade infrequently or not at all. The ETF pricing then is based on matrix-pricing or professional estimates/ guesses that may break down during market stresses. Most commodity ETFs hold futures because it isn’t practical to hold physical commodities except for some precious metals. This adds the complications of backwardation/ contango at future rolls. Also beware that ETFs can hold only up to 15% in private, illiquid assets, so pay attention to what the rest 85% is in. Then, there are leveraged ETFs, +/- 1x, +/- 2x, etc, often in pairs, so the firms make money whether investors have gains or losses."
Barron's (subscription) https://www.barrons.com/articles/etfs-funds-investing-f38dc17a
Thanks for the additional information!