ETFs, like Mutual Funds and Index Funds, are often praised for their ability to offer exposure to ‘risky’ equities while offering portfolio protection and reducing single stock exposure issues.
The basic idea is that instead of trying to ‘cherry-pick’ a specific winner or loser in a particular industry or sector, you can just buy a sector-based exchange traded fund and reduce your risk that you chose the wrong company to be the dominant player in that industry. Furthermore, as long as the industry itself performs well, your industry-focused ETF should follow suit, and your investment will benefit.
As the demand for ETFs increases, the vast array of offerings has also been increasing. As an investor, you are no longer constrained to just buying industry or sector-focused funds. You can now buy funds that focus on pretty much any correlating data point imaginable. Those are the ones that have strict investment guidelines, unlike some ETFs that are actively managed and give the fund managers complete control and leeway to invest wherever and however they want.
Currently, there are over 2,500 actively traded Exchange Traded Funds in the US alone. There were 32 new ETFs offered to investors in May 2021 alone. Let’s think about that for a moment. Outside of the OTC or Over the counter equities available to investors with about 11,500 stocks in 2020, roughly around 6,000 companies’ investors can buy and sell stock in which are traded on the major US exchanges, the NYSE and the NASDAQ. Yes, that is correct, 6,000 US stocks and nearly half that in US ETFs. Continue reading "The Ever-Growing Number Of ETFs and Their Power Over The Markets"
