ETFs' Future: Huge Growth

February 04, 2014

Trading

ETF trading remains a key differentiator, and currently ETFs represent about 25 percent of value traded each and every day.

ETF Trading Activity

The tradability of ETFs has been a major driver of adoption for all investors. But the past few years has seen a sea change in ETF tradability. In many corners of the market, you can now find an ETF that’s substantially more liquid than the underlying securities it tracks.

Average Spreads

Investors trying to cobble together a basket of the Russell 2000 stocks one-by-one-by-one will pay more than 0.20 percent by the time they finish, but they can trade the iShares Russell 2000 ETF (IWM | A-82) for 0.01 percent in spreads all day long.

This is another game changer, especially for institutions. With their supercharged liquidity—better, in many cases than the underlying—ETFs can be the most efficient means to access different areas of the market even taking into account higher expense ratios.

The number of funds qualifying as super-liquid grows each day, and their exquisite liquidity is becoming a win-win for everybody.

 

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