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The ETF Boom: 1124 and Counting!

Companies / Exchange Traded Funds Feb 10, 2011 - 08:28 AM GMT

By: Ron_Rowland

Companies

Best Financial Markets Analysis ArticleThe 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:

ETFs can be bought and sold any time the markets are open.
ETFs can be bought and sold any time the markets are open.
  • Micro Cap
  • Socially responsible stocks
  • Industry sectors
  • Emerging markets
  • Frontier markets
  • Treasury bonds
  • Municipal bonds
  • International bonds
  • Agricultural commodities
  • Foreign currencies
New ETFs are constantly launching!
New ETFs are constantly launching!

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 (NAGS)
  • ETFS Physical Asian Gold Shares (AGOL)
  • Global X Aluminum ETF (ALUM)
  • RBS U.S. Mid Cap Trendpilot ETN (TRNM)
  • AdvisorShares Active Bear ETF HDGE)
  • Global X FTSE Andean 40 ETF (AND)
  • ProShares UltraShort TIPS (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!

Best wishes,

Ron

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.


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