ETFs Have Become Portfolio Mainstay

After taking about 20 years for exchange trade funds (ETFs) to gain popularity, they are “quickly displacing mutual funds as the mainstay of the average investor’s portfolio because of the many benefits they offer,” including lower fees, liquidity and diversification. This according to Validea CEO John Reese in a recent issue of The Globe and Mail. Like mutual funds, exchange traded funds are baskets of securities designed to follow a particular investment strategy, and much of the money invested in them track an index, such as the S&P 500.  Many mutual funds, however, have fund managers that are “actively selecting […]

The Irony of the Low-Volatility Binge

Investor appetite for low-volatility mutual and exchange-traded funds isn’t new. However, it seems to be reaching the point of gluttony. Bloomberg reports that this month, (for the first time), combined assets in the PowerShares S&P Low Volatility fund and the iShares Edge MSCI Minimum Volatility USA ETF reached $20 billion. But as investors continue to flee the rest of the equity markets (yanking almost $60 billion from U.S. stock funds this year alone), the mass inflow to the low-vol funds is making the shares in those funds more expensive, leading to more price swings and, ironically, volatility. Although not designed to do so, the PowerShares fund is beating the market this year (up 3.4% to date […]