ETFs: The More, The Merrier

December 06, 2018

At, it’s our job to cover every new launch. We try and do it with the level of skepticism any investor should take toward a new product. At the same time, we try to keep an open mind. When we see something unique, it’s easy to fall into the trap of asking, “Wait, what? Who is this even for?” 

But the ETF industry, with nearly 2,200 funds now, clearly serves more than one master. Not every investor is a 30-year-old with an infinite time horizon and daredevil risk tolerance. Not every investor is a retiree looking for income. Not every investor is a day-trading hedge fund manager.

But there are ETF products that are perfect for each one of those needs, and many more. And I think the proliferation of thematic and niche ETFs actually makes all of us better investors.

Ignore The ‘Easy’ Button
Even if you’re the most boring investor out there, the choices you make should be informed ones. Even if all you want is large-cap U.S. exposure, you have dozens of potential ETFs to choose from. Simply hitting the “easy” button and buying the biggest one, or the one from the brand you’re familiar with, is just as much a mistake as investing in the triple-leveraged inverse version “by accident.” But with many rank-and-file investors—and advisors—that’s the mistake I see over and over again.

When considering a newfangled corner of the market, where traditional indexes and research aren’t present—video games, cybersecurity, cannabis, pets, whatever—we all naturally ask a lot of questions: How did the issuer pick the stocks? How are they weighted? Are they giving me pure-play exposure? How risky are the holdings? How small-cap? How profitable? Will this ETF trade well? More importantly, we naturally ask, “Do I agree with this fund’s approach?”

It’s A Good Thing
Those are good questions. Those are the right questions. With few exceptions, the answers to those questions are going to be highly personalized. Your size-12 sneaker might help you finish the Boston Marathon, but it would be a ginormous boat of a shoe on me. But they’re good questions not just about the next head-scratcher—they’re good questions about any ETF.

So when people ask me if there are too many ETFs, my answer is no. Not just because there’s still room for innovation (which there is), but because the increase in choices keeps us all on our toes. And that’s a good thing.

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