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The ETF Store Launches Weekly Radio Show
The ETF Store is launching a weekly radio program called “The ETF Store Show”. The new show will air every Saturday from 3-3:30pm on KCMO 710AM and focus on helping individuals better understand all aspects of Exchange Traded Funds (ETFs) and how to effectively implement them in investment portfolios.
Hosted by The ETF Store’s Chief Operating Officer Nathan Geraci and featuring a variety of ETF industry experts, “The ETF Store Show” will be the first local radio program focused solely on Exchange Traded Funds. Geraci commented, “With the tremendous growth of ETFs, investors are demanding more information on how to invest in ETFs and take advantage of their low cost, tax efficiency, and diversification. The ETF Store Show aims to help fill that information gap and provide listeners with actionable investment ideas”.
ETFs recently surpassed $1 trillion in assets and have been called the next generation mutual fund. Compared to actively managed mutual funds, ETFs are typically less expensive, more tax efficient, and offer greater flexibility and transparency. ETFs also allow investors to invest in asset classes that were previously unavailable or difficult to access.
Got Gold?
Gold continued its steep upward ascent today as the price per ounce soared past $1,700 after the downgrade of US sovereign debt by Standard & Poor’s. With growing concern that the US may be headed towards another recession and the continued uncertainty in Europe and the global economy in general, gold has become a “safe haven” for investors nervous about investing in equities, currencies, or just about anything. In particular, the continued decline in the US dollar and, to an extent, the Euro, has helped propel the shiny metal to record highs.
The US dollar is likely to continue to come under pressure due to a combination of continued low interest rates in the US – kept artificially low by the US Federal Reserve (which makes other currencies with higher rates more attractive to investors), a mounting US government deficit and national debt burden, and slowing US economic growth (investors are more attracted to countries with more robust growth). The recent wrangling over the US debt ceiling put additional pressure on the dollar.
The Euro has a number of countries in dire financial straits (Portugal, Ireland, Italy, Greece and Spain, affectionately named the PIIGS) which could cause a financial crisis in the EU. Gold, in a sense, is becoming a currency replacement for the dollar and the Euro. Gold is also a hedge against inflation and a number of areas around the globe are seeing rising inflationary pressures which have increased global demand for gold. Finally, Chinese consumers as well as consumers in other BRIC and emerging countries are starting to buy more gold as an investment, not to mention the fact that Central Banks around the globe are becoming significant net buyers of gold.
With gold continuing to hit record highs, investors are becoming increasingly aware of the benefits of having gold in their portfolios. ETFs are one of the cheapest and most convenient ways for investors to access gold. Two ETFs that provide indirect ownership of the commodity itself, SPDR Gold Shares (GLD) and iShares COMEX Gold Trust (IAU) are the largest ETFs of their kind and are essentially the same ETF; both take physical ownership of gold bullion and a share of each represents a defined percentage of that gold.
With all of the uncertainty in the markets, gold has again proven itself to be an investment alternative worth looking at. Investors would be wise to consider the diversification benefits of including gold as part of their overall portfolio. At The ETF Store, we’ve been consistent in our belief that there’s a place for gold in investment portfolios and believe ETFs are the best way to access gold exposure.
Actively Managed Mutual Funds Dying a Slow Death?
Is it simply a matter of time before ETFs eclipse actively managed mutual funds? Businessweek’s recent article “Americans Lose Faith in Stock Pickers” points to the fierce competition actively managed equity mutual funds are facing from ETFs. Data from the Investment Company Institute referenced in the article shows U.S. equity mutual funds have lost an estimated $8 billion to redemptions year-to-date through the end of June. This puts domestic equity funds on track for their fifth straight year of withdrawals. This is in stark contrast to the staggering ETF inflows we highlighted last week. The below chart from Businessweek clearly shows the remarkable shift away from equity mutual funds and the flow of funds into ETFs:
Geoff Bobroff, an investment management consultant quoted in the Businessweek article, sums up current investor sentiment regarding mutual funds by stating “actively managed domestic stock funds haven’t demonstrated that they can add value”. With the underperformance of actively managed mutual funds and their exorbitant fees, investors are flocking to passively managed, inexpensive ETFs.
The flow of money out of mutual funds and into ETFs isn’t just a fad. BNY Mellon recently released a comprehensive report titled ETFs 2.0: The Next Wave of Growth and Opportunity in the U.S. ETF Market which predicts “continued exponential growth” stating that ETF assets will hit $2 trillion before the end of 2015. Strategic Insight, who authored the report, estimates that 20% to 30% of the new flows into ETFs are from assets that would otherwise have been invested in actively managed mutual funds. As with any industry or marketplace, it’s the consumer who filters through the noise and determines which products are the winners and which are the losers. In this case, investors are starting to vote with their own money for ETFs over actively managed mutual funds.