Tags: Investors | stocks | bonds | ETFs

CNBC: Investors Continue to Flock to ETFs

By    |   Thursday, 13 March 2014 09:46 AM

Purchases of exchange-traded funds (ETFs) continue to grow, as investors seek low-cost, passive investments that they can buy or sell anytime during the trading day.

U.S.-listed ETFs enjoyed net inflows of $188 billion last year, almost matching the record total of $190 billion in 2012, according to research firm Morningstar, CNBC reported. 

Low fees represent a major part of ETFs' appeal. ETFs have an average annual expense ratio of about 0.6 percent, compared with 1.3 percent for actively managed mutual funds and 0.8 percent for passively managed mutual funds, according to Morningstar.

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"ETFs are sort of the Amazon.com of the fund world," Ben Johnson, Morningstar's director of passive funds research, told CNBC. "They have had a leveling effect, offering both individual investors and large institutions access to a wide variety of exposures at very low prices."

ETFs first gained popularity as a vehicle to invest in stocks, but they are increasingly being used to invest in bonds and bank loans, which are the floating-rate bank loans made to companies rated below investment grade.

"ETFs have become even more attractive in the current environment because the expectation of making big money in the fixed-income market is not really on the table," financial planner Christopher Krell of Cassaday & Co. told CNBC.

Wela Strategies in Atlanta has an own your age (OYA) strategy for investing in stock and bond ETFs, according to ETF Trends.

"The basic premise is younger investors are able to incur elevated risk that justify a larger exposure to equities, while investors nearing retirement are more conservative and desire portfolios composed of income producing, fixed income securities," according to a report by S&P Capital IQ obtained by ETF Trends.

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InvestingAnalysis
Purchases of exchange-traded funds (ETFs) continue to grow, as investors seek low-cost, passive investments that they can buy or sell anytime during the trading day.
Investors,stocks,bonds,ETFs
297
2014-46-13
Thursday, 13 March 2014 09:46 AM
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