Two things I've blogged about on a regular basis are options trading and new ETFs coming to market. Given my (even more) hectic schedule lately, my research time and as a result my number of trades has suffered. Maybe that's good in this market, who knows. The second item is ETFs. I subscribe to a number of ETF feeds to keep my finger on the pulse of this emerging product line. Many speculated during 2007 that the number of new ETFs coming to market was getting ridiculous and the focus of them was getting too specialized. It got to the point of why bother picking up the ETF, may as well just buy the "best" stocks they hold in the sector and go from there. I've been looking for numbers to see how many ETFs were opened vs. closed this year and haven't found a definitive list, but I will say that the introduction is slowing and I'm getting a lot more "headlines" that read like this:
Pay attention to the inflows or outflows and understand the risks of entering a new ETF. So what happens when your ETF is closed? Well, nothing too serious because the shares are liquidated and you get your money back. OK, I get my money back, what's the problem? Well, it may become a taxable event and one of the main advantages of owning ETFs is tax efficiency. Also, having your shares dumped may become a problem because you might have a hard time getting back in for one. And you're on the hook for more commissions should you decide to get back or try and reconstruct the ETF holdings yourself. It could turn out to be a costly event in the unfortunate event.
Even with my hectic schedule, there hasn't really been an ETF introduced in recent weeks that has caught my attention. There seems to be a lot of consolidated type ETFs where they're holding many different asset classes and performing the rebalancing for you. I also expected that the actively managed ETFs may bring on a flood of new and interesting products, but not a whole ton.
Has the creation of new ETF products peaked?
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