Real Dan­gers with ETFs

The Economic Times - - Money -

Septem­ber 2015, when large high­yield bond is­suer Sprint was down­graded sev­eral notches, spurring a fu­ri­ous sell­off that bled into broader markets.

Mean­while, some as­set man­agers are ar­gu­ing that ac­tive man­agers now have a bet­ter chance than they have had in years to out­per­form indexes, es­pe­cially for those who steer clear of bonds and stocks that are in­cluded in ETFs.

ETFs will con­tinue to at­tract a sub­stan­tial pro­por­tion of all new in­vestor money com­ing into stock and bond markets. In­vestors ap­pre­ci­ate these funds’ low fees and easy ac­ces­si­bil­ity.

While the per­ceived per­ils have in­deed not fully man­i­fested them­selves, it is clear that ETFs are trans­form­ing the be­hav­ior of markets. And this may end up ex­ac­er­bat­ing mini cor­po­rate bub­bles that pop in un­pleas­ant ways.

— Bloomberg

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