Why ETFs Could Overtake Old-School Mutual Funds

They’re still a blip, but a fast-growing blip.

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Jim Wiandt of IndexUniverse has come right out and said it: Exchange-traded funds will surpass traditional mutual funds. How and why? As he explains it:

Arguably still just a blip on the radar with only 1 in 20 mutual fund dollars, ETFs have now woken up the major players by taking often tremendous shares of the new flow coming into the market. And they've done this while attracting many investors who don't fall into the category of old-school index investor.

There are tremendous obstacles still in the way of ETFs getting into some of the biggest (retirement) asset pools, but you can begin to feel a real push in that direction. And year-over-year, the taxable money is increasingly going into ETFs, and there's now universal recognition, at least, of ETFs by financial advisors. Add to all of that the fact that ETFs just are a better mousetrap in terms of cost and trading efficiency (all the more so for active funds, though some argue otherwise).

Have you been won over by ETFs? Check out these picks for new investors.