ETFs Are Eating the World

Comments

• larryB

  January 16

  I am joking of course but for those inpatient and obsessive investors, not having to wait till late afternoon to see how your stuff did is a key attraction to going ETF vs Mutual Fund.
• racqueteer

  January 16

  larryB said:

  I am joking of course but for those inpatient and obsessive investors, not having to wait till late afternoon to see how your stuff did is a key attraction to going ETF vs Mutual Fund.

  I think that no fees are at least on par with intraday availability motivation.
• yogibearbull

  January 16

  I recently read that while ETFs are extremely popular with retail investors, big investors have moved on to direct- or customized- indexing. So, in 5 years, direct-indexing may be eating the world (-:)
  
  What's great about direct-investing? Better control and TLH.
• Mark

  January 16

  And TLH is?
• Observant1

  January 16 edited January 16

  Mark said:

  And TLH is?

  Tax Loss Harvesting
• Sven

  January 16

  Lower fee has been a big driver for ETF growth. Now there are more actively managed ETFs available. Not have to paying the transaction fees is always welcoming.
  
  Some firms such as Dodge & Cox may offers ETFs too in the future. Other smaller firms are converting for their survival.
• AndyJ

  January 16 edited January 16

  In my limited exploration among active etf's, about 90% of the ones I've looked into have volume that's so tiny you'd have to spend an inordinate amount of time to either fill out or sell out of a decent-size position. (And even etf's with fairly decent average volumes sometimes have periods of very low volume.)
  
  Remember ETF Deathwatch? It's apparently still around, much reduced from what I recall.
• Observant1

  January 16

  90% Of All Investment Products Are Crap
  https://www.mutualfundobserver.com/discuss/discussion/65108/90-of-all-investment-products-are-crap/p1
• AndyJ

  January 16 edited January 16

  Observant1 said:

  90% Of All Investment Products Are Crap
  https://www.mutualfundobserver.com/discuss/discussion/65108/90-of-all-investment-products-are-crap/p1

  Ha! Leave it to Barry R. to tell it like it is.
  
• catch22

  January 16

  To add: A decent report for reading and chart views.
  
  Fidelity 2025 'ETF' flows report, January 15.
• linter

  January 16

  a friend of mine just wrote this. makes sense to me.
  
  Another consideration.
  
  With Index ETFs "overtaking" mutual funds and individual stock picking, large cap index and sector funds, whether price weighted (the DOW30) or market cap weighted ($QQQ), are receiving automatic inputs via 401K/IRA deposits on a regular basis throughout the year.
  
  Forty to 60 cents of each of those dollars flows into the top 10 largest holdings regardless of current news/charts/ratings etc. So up they go in price.
  
  Periodic readjustments of fund components works to keep the latest and best large caps on top of that pile.
  
  And as those fund prices rise, the large cap premium grows.
• msf

  January 17 edited January 17

  Investors have been moving toward index funds for years. While the existence of ETFs may have accelerated this migration it would have happened in any case. So this is not just a ETF phenomenon. Additionally, 401k plans have been slow to include ETFs in their offerings, though that is changing.
  
  The AUM of price weighted funds is minuscule (relative to total market size). So I wouldn't give them too much thought. The only etf tracking the DJIA is DIA, with $44B. (Other DJIA-based funds are leveraged or not price-weighted or ...) While the Nikei 225 is another well known price weighted index, there are no US based ETFs tracking it.
  https://etfdb.com/index/nikkei-225-index/
  
  Market cap weighted funds have both a large cap bias and a growth bias. Their growth bias is significant enough that ETFdb considers them (e.g. VOO, VTI, VT) large cap growth funds.
  https://etfdb.com/etfdb-category/large-cap-growth-equities/
  
  Proponents of equal weighted funds often reference the large cap and growth biases of market cap weighted funds in making their case. Here's a recent (May 2025) piece by S&P comparing equal weighted and market weighted S&P 500 indexes.

  One, the cap-weighted S&P 500 has a bit of a growth bias. So if you look at its overlap relative to some very popular growth funds, you'll see that overlap is approaching 50%. ...
  
  The second dynamic that's present is we've seen a lot of valuation stretch in the cap-weight S&P 500 relative to equal weight. So equal weight is relatively inexpensive. The discount right now is about 25% if you look at P/E ratio. Over time, that number is more close to parity.

  https://www.spglobal.com/spdji/en/index-tv/article/examining-equal-weight-performance-in-challenging-markets/