With the Explosion of ETFs, Investors Now Have a Tool at Their Disposal to Implement Investment Ideas
David Mazza, Head of Exchange Traded Fund (ETF) Investment Strategy for State Street Global Advisors
Since 2010, Americans have withdrawn $362 billion from actively managed stock mutual funds. One investment strategy that can provide some stability, however, is exchange traded funds. Since 2010, $368 billion has poured into exchange traded funds (ETFs), a lower-cost investment product that is not yet as well-known (or understood) as the mutual fund.
Twenty years ago, the world’s first Exchange Traded Fund (ETF) was launched. Today, it is a trillion dollar industry bringing the ability for both institutional and individual investors to gain access to the same areas of the market at the same price.
Over time, ETFs gained momentum as investors recognized the inherent benefits of such a vehicle. ETFs help to provide a cost effective, transparent and liquid means of gaining exposure to asset classes around the globe as wide ranging as emerging market fixed income to corporate bonds and, more recently, tactical asset allocation strategies.
As shown through ETFs’ performance during periods of market crises including market closures, constituent trading suspensions, and natural disasters, the vehicle may offer more than just the ability to gain exposure to a given market or asset class. ETFs have added an incremental source of liquidity to the market and are now a mechanism used by investors to uncover the true value of securities.