I always find it a bit frustrating but also interesting to see so many analysts and the media always trying to group all ETF’s together in one group. I don’t see the point of doing so. ETF’s have certainly been stealing market share from mutual funds but while all mutual funds seem to fit the “buy and hold” model, that is far from being the case for most ETF’s.
Differences Between ETF’s
ETF’s should be looked at by category. If you take a look at inverse or leveraged ETF’s for example, I think you’ll see that while these products are very much used and very useful to some investors, many others should never even consider buying them. A 3X leveraged ETF is something that should be held for a few minutes, a few hours or perhaps at the most a few days. That is likely not what you are you looking for and neither am I. That being said, those products provide great value for investors looking to profit from short term bets so they certainly have their place in the marketplace.
Long Only ETF’s
That being said, I think the vast majority of other ETF’s fit very well in a long term buy and hold strategy. Sure, I personally believe in a very simple type of ETF portfolio that would hold broad asset classes (such as US equities) but depending on each investor’s context, they might want to get involved with some more specialised ETF’s that cover a specific industry, a specific bond maturity, etc.
Through their smaller fees, enhanced liquidity and the diversification that they provide, I think ETF’s have finally made it possible for individuals to invest in as efficient of a way as pros with millions of dollars and full time teams managing their funds…!