ETFs market to individual investors

Posted Oct 3rd 2007 6:35PM by Zac Bissonnette
Filed under: Newspapers, Marketing and Advertising, Mutual Funds, Personal Finance

Having already accomplished tremendous growth by marketing to financial advisers and other money managers, the ETF industry is now moving to target individual investors.

According to the Associated Press:

ETF ads have been cropping up in surprising places, including on TV during college football games and in subway cars in New York City.

Firms have also expanded advertising into personal finance magazines geared to mom-and-pop investors, such as Time Warner Inc.'s Money and Kiplinger's Personal Finance, as well as titles for general, if affluent, readers, such as The New Yorker.

The slick marketing campaigns will no doubt lure in some investors but the question is: Is that good for the investors? I would argue that, in most cases, it probably isn't.

ETFs, which are traded like stocks, require a commission when they are bought and sold -- unless you're trading in large dollar amounts, this means that they will likely be inferior to a traditional mutual fund.

In addition, the fact that they can be traded all day, with live real-time quotes, could encourage many individual investors to trade actively which, as numerous studies have shown, is the key to bad performance in investing.

Do yourself a favor: try to ignore the ad campaign and, unless you have a lot of money to invest or a lot of experience, stick with traditional index funds.

Tags: ETF

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Reader Comments (Page 1 of 1)

10-03-2007 @ 9:47PM

JakePearsol said...

Can someone tell me what an ETF is?

10-03-2007 @ 11:43PM

diane said...

An ETF is an international stock. It could cover various countries, or various companies ...It is traded like a stock. You can buy it from a broker but when you sell it you have to ask the broker was the price is at the time of selling (which is called NAV (NET ASSET VALUE.) VANGUARD HAS SOME SO DO MANY COMPANIES THAT HANDLE FUNDS. A FUND YOU HAVE TO SELL WHEN THE MANAGER MAKES HIS SALE. A ETF AS MENTIONED YOU CAN SELL WHEN U WANT TO. I LIKE VWO.
OF COURSE IT WAS PURCHASED AT $78.00 AND NOW IT'S OVER $100.00 --IT CAN BE RISKY, BUT THE VWO IS NOT JUST COMPANIES THIS ETF COVERS COUNTRIES, LIKE CHINA, BRAZIL,ETC. IT'S CALLED EMERGING MARKETS. I BELIEVE IT ALSO PAYS A DIVIDEND. CHECK WITH A BROKER FOR ADDITIONAL ADVISE OR CHECK OUT GOOGLE MAYBE THEY CAN EXPLAIN IT BETTER THAN I DID.