Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Krauss' concerns are absolutely legitimate -- especially about ETFs failing to approximate NAV during moments of market stress.
OTOH, Krauss' concerns are self-serving too. -- lower-fees which ETFs provide are working counter to the profitability of the old-line money-management industry. For any retail investor who was ever sold a "class A" fund for a 7% load, you know that load-funds held a persistent, material difference between bid and ask.
Fink's comment is also self-serving --- he runs the largest ETF complex, so is quite willing to poo-poo concerns re the risks/shortcomings of ETFs.
If (a part of the ) problem is that ETFs encourage "short term-ism" by making it very convenient for institutional money, hedgies, etc to make very short-term, low conviction bets, perhaps tax policy could have an effect -- something like: for very short-term trades (say 3 days or less) a "proceeds tax" -- levied not on gains, but on proceeds of sale, of perhaps 5%. This might serve to discourage ultra-short-term speculation, in favor of real investment.
Too bad the relevant regulatory authority (SEC) are a bunch of hacks who have been co-opted/corrupted by Wall Street, and who have no concern for protecting the retail investor -- on the ETF issue or any other.
Tradability or low expenses or whatever 'benefits' aside, I'm not a fan of ETFs either. If I want a 'fund' to buy and hold for a long time, I will go with a properly-run, low-cost OEF any day of the week. If I'm bored and want to speculate on a sector/idea, I'd play with an ETF. ETFs also present the illusion of "power" to individual, and likely less-informed, investors who end up churning their accounts regularly based on every wiggle of the market, because they can do so, and quite cheaply if not for free, with ETFs.
The fact that hedge funds and others hold/trade ETFs versus their underlying holdings (or futures contracts) right there turns me off to them as a long-term investment vehicle.
I used to hate the idea of mutual funds and their once-a-day trading. But seeing the markets in recent years, I've come to like that feature since, among other things, it forces me to analyse a situation versus react intraday -- and likely emotionally. Plus, most OEFs are designed / intended as long-term holdings, not trading vehicles.
Comments
OTOH, Krauss' concerns are self-serving too. -- lower-fees which ETFs provide are working counter to the profitability of the old-line money-management industry. For any retail investor who was ever sold a "class A" fund for a 7% load, you know that load-funds held a persistent, material difference between bid and ask.
Fink's comment is also self-serving --- he runs the largest ETF complex, so is quite willing to poo-poo concerns re the risks/shortcomings of ETFs.
If (a part of the ) problem is that ETFs encourage "short term-ism" by making it very convenient for institutional money, hedgies, etc to make very short-term, low conviction bets, perhaps tax policy could have an effect -- something like: for very short-term trades (say 3 days or less) a "proceeds tax" -- levied not on gains, but on proceeds of sale, of perhaps 5%. This might serve to discourage ultra-short-term speculation, in favor of real investment.
Too bad the relevant regulatory authority (SEC) are a bunch of hacks who have been co-opted/corrupted by Wall Street, and who have no concern for protecting the retail investor -- on the ETF issue or any other.
Caveat investor !
The fact that hedge funds and others hold/trade ETFs versus their underlying holdings (or futures contracts) right there turns me off to them as a long-term investment vehicle.
I used to hate the idea of mutual funds and their once-a-day trading. But seeing the markets in recent years, I've come to like that feature since, among other things, it forces me to analyse a situation versus react intraday -- and likely emotionally. Plus, most OEFs are designed / intended as long-term holdings, not trading vehicles.