NEW YORK (TheStreet) -- While the $1.1 trillion exchange traded fund industry has been gaining in popularity, especially with younger investors, many industry professionals agree that it will never replace the mutual fund.
"Mutual funds showed some decline in the last months and ETFs have grown in a faster pace in the last month, but they are certainly not dead," said Pamela Carello DeBolt, a senior analyst at Cerulli Associates. "ETFs are growing they will not be able to keep the explosive pace that they have over the next couple years."
Mutual funds are in no way being depleted, said Vanguard (VTI) founder John Bogle. While Bogle admits that the ETF has gained in popularity, he believes that the latest rise in ETF investing won't stick around long.
It's, in fact, more of a fad, he argues."It's not going to do well because investors chase fast returns. It is not a business where you should trade all the time, and ETFs are designed to have you trade," said Bogle. "I think eventually investors will figure that out and will come to a more centrist strategy, particularly with respect to all of the crazy ETFs that exist out there. " Younger investors prefer ETFs because they are more user-friendly and transparent in the uncertain economic environment, said Lawrence Golub, president of Golub Capital (GBDC). He adds that ETFs also provide a greater degree of options especially for investors that actively manage them. "There is more of a generational development with ETFs," Golub said. "ETF shares are marginal or if you want to you can borrow against security holdings to hedge your investments." The ability for investors to transact during the day is one of the main reasons ETF popularity has grown, said Sean Crawford, a portfolio manager at Barclays Wealth (BCS). "ETFs are great for tactical and narrow trading ideas that are strategic. We run an ETF portfolio with very narrow trades. It is more of a way of expressing a more defined opinion," said Crawford. "I don't think they will kill mutual funds. ETFs are good at replicating the performance of the S&P 500."
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV