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How Long is That ETF Going to be Around?
By JLP | May 9, 2007
Today’s Getting Going column by Jonathan Clements is titled Survival of the Fittest: Finding
An ETF With Staying Power. It’s an interesting read.
His point? There’s too many exchange-traded funds (ETFs as most people now call them). As the article states from Morningstar, there are:
39 ETFs focused on healthcare
32 ETFs focused on technology
35 ETFs focused on naturual resources
22 ETFs focused on the financial sector
Do we really need that many? If not, which ones will stay around for the long-term.
Jim Wiandt of IndexUniverse says that an ETF’s long-term existence isn’t secure until it reaches $200 million in assets. Why? Because any less than that and the fund may not be able to cover all their expenses. Clements goes on to suggest sticking with companies like Barclays (iShares) and Vanguard becuase of their reputations.
Personally, I would stick to basic low-cost ETFs focused on indexing and ignore the rest. Oh, and for the record, I checked and every ETF I follow in my portfolios meets the $200 million threshold (I’ll be updating the portfolios later today).
Topics: Exchange-Traded Funds, Getting Going, Investing, Jonathan Clements |