This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Mutual Funds Gain Ground on ETF 'Fad'

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 - Get Report). 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."
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
VTI $104.64 -0.59%
BCS $9.45 -2.07%
GBDC $17.35 -0.17%
AAPL $94.19 -1.04%
FB $118.06 0.54%


Chart of I:DJI
DOW 17,651.26 -99.65 -0.56%
S&P 500 2,051.12 -12.25 -0.59%
NASDAQ 4,725.6390 -37.5850 -0.79%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs