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Dion's Weekly ETF Blog Wrap

NEW YORK ( TheStreet) -- Don Dion posts his current insights on the stock, bond, commodity and currency markets in his RealMoney blog, anticipating which ETFs will be in play next.

Here are three of his blog posts from the past week:


Frugality Puts Vanguard in the Lead

Published 1/05/2011 5:16 p.m. EST

2010 was a memorable year for the ETF industry, which drew increased attention, expanded its lineup and -- perhaps most notably -- passed the $1 trillion mark for assets. The National Stock Exchange's monthly report, released this morning, shows that newcomers to the industry are certainly making their presence known.

A casual observer of the ETF industry would most likely be familiar with BlackRock's (BLK - Get Report) iconic iShares ETF lineup as well as State Street's (STT) SPDR brand. Both of these industry icons saw notable inflows during 2010. BlackRock remains the largest fund provider, with assets under management totaling $447 billion. In 2010, $30 billion flowed into the firm's products. State Street's SPDR lineup saw cash inflows of $12.5 billion during the same period.

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Vanguard -- perhaps best known for lower-cost, me-too products that offer exposure similar to older iShares and SPDR funds -- was the king of cash inflows in 2010. Consider this: In 2005, the iShares product line saw cash inflows of nearly $45 billion, while Vanguard saw just $4.7 billion in total cash enter its relatively new line. In 2010, Vanguard's net cash flows topped those of any other single issuer. When trading ended on Dec. 31, 2010, Vanguard funds had attracted nearly $40.5 billion during the calendar year.

What makes Vanguard such a big threat to the competition? Looking forward, it's the return of longer-term investors. Vanguard has a loyal client base, a well-known mutual fund line-up and a commission-free trading platform for its brand-name ETFs. Instead of fighting the flight from mutual funds, Vanguard has done a good job of staying one step ahead. By developing ETFs targeted at longer-term investors -- many fund strategies sound extremely similar to those of mutual funds -- the firm is able to easily transition existing clients while attracting frugal ETF investors from other areas.

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