This article is a short follow-up to the article Index Funds & The DIY Investor Herd, where I discussed the trend of the DIY investor herd and index mutual funds, ETFs, and index related financial products. In the article I discussed many myths, inaccuracies, and misrepresentations made by aggressive proponents of index funds / ETFs, as well as by the media and financial institutions. Prior to reading this update it may be useful to read the article, if you haven’t already.
In this week’s Financial Post (August 2009), it was reported that exchange-traded funds (ETFs) had hit a record of $646B (USD) in assets! Below is a summary of the July stats they reported:
- Largest month on record with flows of $10.14B
- US stock ETF inflows were $3B (first positive flow of 2009).
- US stock ETFs were the largest asset class at $244.6B.
- Technology & Telecommunications were the two most highly correlated sectors (0.89).
- Financials & Utilities were the least correlated sectors (0.59).
- Greatest volume increase (month to month) was in the consumer staples and natural gas sector ETFs.
- Other ETF areas that saw increased interest were international treasury, Chile related industrial, developed market income, short international.
- Largest inflow was from emerging markets ETFs at $1.2B.
- Gold commodity ETFs experienced the largest outflow.
- The largest ETF is SPY (S&P500) at $69B, which was also traded the most.
They also reported volumes (shares changing hands or being traded) were declining since March. However, shares being traded does not mean a lack of an interest, as we can see from the record dollar value in assets! March volume was 54.5B shares, while July’s volume was 33.5B.
It should be pretty clear by now that index funds / ETF’s and index related products, are going to be the financial products focused on the most by the media, financial institutions, investment firms, insurance companies, and DIY investor herd.
Educate yourself and gain financial knowledge. Develop an overall plan, and devise strategies on achieving parts of the plan. Be aware of such product’s limitations, inaccuracies & myths, and other options available. Once armed with information & knowledge, then decide whether or not index funds & related products are tools that would work well for a particular strategy. Don’t just follow the herd!
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