ETF Assets Grew by $187 Billion in 2007
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If you read this blog regularly then you know I’m a huge proponent of ETF’s or Exchange Traded Funds. It was love at first sight and I’ve been a faithful partner since the days of Y2K.
Back then very few people were familiar with this strange 3 letter acronym, but that has slowly changed over the years; these days many of the personal finance blogs I come across talk openly about the benefits of investing in exchange traded funds.
From my perspective, there is a lot of anecdotal evidence to support the increasing popularity of exchange traded funds but the empirical evidence is undeniable. I think it’s fair to say the cat is out of the bag.
I found this article a few days ago on financial-planning.com and want to share it with you:
Record year for exchange-traded funds meant increase in assets, number and trading volume
January 16, 2008- The ETF industry saw the most successful year in its history in 2007, according to the US-Listed ETF Industry Review and 2008 Outlook released today by State Street Global Advisors in Boston.
ETF assets grew 45% year-over-year, from $420 billion to $608 billion. The number of ETFs on the market increased by 141% as well, with 270 new ETFs introduced this year. Much of the growth came from fixed-income, international and specialty-domestic ETFs including fundamentally weighted, inverse and leveraged funds. Average daily volume soared to $58 billion, representing the liquidity and widespread use of the funds.
ETFs based on international indexes drove the largest amount of asset growth, accounting for $59 billion of the $187 billion increase of the overall industry. Growth, fixed-income, commodity and currency ETFs were also significant drivers of growth.
Five new providers emerged this year, though Barclay’s, State Street, Bank of New York Mellon and Vanguard maintain a hold over 92% of the industry’s assets.
Overall, investors showed a preference for international, large cap and growth ETFs in 2007, a trend that State Street expects to continue throughout 2008.
In Conclusion
I believe Exchange Traded Funds will continue to grow in popularity as more and more people wake up to the cost inefficiencies of other investment alternatives. I’ve written many posts on the different nuances of ETF’s; to learn more click on any of the links below or the ‘related links‘ at the bottom of the page:
- 3 Ways to Build a Model Investment Portfolio Using ETF’s
- Active Investing v Passive Investing? It’s a Secondary Decision In My Book
- ETF’s, Superman and Popularity Contests
Random Musing
I wonder if Exchange Traded Funds will ever be a serious player in company sponsored retirement plans. The mere idea of that, I’m sure, makes ‘big Wall Street’ shake in their boots…
Tags: ETF, Exchange Traded Funds
Pinyo @ Moolanomy | Jan 23, 2008 | Reply
I agree, ETF is the new mutual fund. With this year market turbulence, I wouldn’t be surprised if a bunch of funds will be handing out huge capital gains distribution this year. I am planning to off load majority of my mutual funds in taxable accounts and switch to ETFs this year.
CHM | Jan 23, 2008 | Reply
Think that’s a good idea. The ETF’s will give you more flexibility (i.e covered call writing, etc).
Originally, when I started this blog I wondered how it would fit in, in relation to many of the Personal finance blogs.
And then I realized I preach cost efficiencies or so called investment frugality. Very much in line with what everyone else is saying, my vein just happens to be investing and financial planning.
With that said, ETF’s are the plasma.
kentuckyliz | Feb 5, 2008 | Reply
Do ETF’s work well for DCAing on a monthly or bimonthly basis? Or should a person save up in a money market first and make only occasional purchases because of trading costs?
I’ve heard ETF’s are good for large lump sum purchases but not DCA’ing. So I’m confused.
CHM | Feb 5, 2008 | Reply
Hey Liz,
I don’t have any experience with commission based accounts. I would do a bit of research on the internet on automatic investment plans, also check out Sharebuilder.
I’m a big fan of DCA’ing into your investments, including ETF’s.