The headlines about exchange-traded funds suggest there are no limits to the growth of these low-cost, easily traded alternatives to mutual funds.
Among the recent developments: ETFs have attracted at least $100 billion in new cash for each of the past six years, growing at a far more rapid pace than traditional mutual funds. ETF assets have doubled over the past three years to $1.4 trillion, with one study projecting they'll hit $3.5 trillion by 2016. ETFs have recently begun to appear as investment options in 529 college-savings plans and 401(k)s.
Yet obstacles are beginning to appear. It has become more difficult for fund companies to launch ETFs that are significantly different or lower-cost than what's already on the market.
"We're close to a tipping point in terms of numbers," says Todd Rosenbluth, director of ETF research at S&P Capital IQ. [Read more...]