How have ETFs become so popular?
After the “ETF Rule” passed in September 2019 by the SEC, ETF issuers have been able to bring new strategies to the market much easier than before. This has caused the ETF market to increase by 50%, equivalent to a $3.9 trillion ETF industry. This market has seen an increase in popularity because of its simplicity, cost efficiency and diversification. Especially after the pandemic, investors are looking for safer investments to diversify their portfolios with and further growth may be ahead.
Dave Nadig, CIO at ETF trends believes that ETFs are likely to surpass mutual fund assets in the US over the next five years. He believes that with the integration of technology into the asset management space, investors will lean more towards ETFs because of their efficient nature.
The standout feature of an ETF is that it can be traded on public exchanges like a stock. This allows easy and cheap investment for all types of investors. Additionally, this kind of investment provides risk diversification.
The rise in popularity of ETFs has led to some of the largest financial institutions offering their own products: iShares, Vanguard, Charles Schwab, Proshares.
As an investor, you can choose what type of ETF you want to invest in as there are thousands to pick from. If you are looking for a longer-term investment, you may choose an ETF that tracks mega-cap stocks but if you’re investing on the short term, you may be interested in an ETF that tracks startups with a high growth potential.