There may be no one left on the planet who hasn’t already heard that ETFs are reordering the business of investing. What’s less obvious is where this train is headed and what it means for investors. Yes, innovation in the ETF space is alive and well. That’s the good news, based on the theory that a wider menu of betas enhances opportunity for building portfolios.
Yet not every new arrival represents genuine progress. In fact, some ETF launches look more like tools for cashing in on the frenzy of demand for exchange-listed products (gasp, gasp). That, of course, is par for the course in finance, which has a less-than-perfect history of giving investors what they need at a fair price. All of which reminds that rule number one when kicking the tires of new securities is caveat emptor! Yes, that applies to ETFs. As we reported in the May issue of WM, the ETF revolution is in high gear, but investors should be increasingly selective when it comes to the launch du jour.