Quick Take: ETFs Won't Replace Stock Pickers
NEW YORK ( TheStreet) -- Despite the growing popularity of exchanged-traded funds, Shundrawn Thomas, head of FlexShares from Northern Trust, told TheStreet's Gregg Greenberg it will not eliminate individual stock picking.
It can be difficult selecting specific companies for investment, so ETFs have become a viable alternative for investors, he said. But now there is something different -- smart beta funds, which Thomas said are different from typical index funds.
Smart beta funds have the explicit purpose of implementing a specific strategy, whereas traditional funds track the entire performance of broad-based indices. This leaves investors exposed to a lot of different risks of which they might not be aware.
While iShares and State Street offer similar services, Thomas said there's always room in the marketplace for something different.For instance, FlexShares offers the Global Upstream Natural Resources ETF (GUNR), which focuses on investments in energy, timber, agriculture, and water. This unique fund has drawn investors' interest because it's not a common strategy among other ETFs and it offers true diversification. Regarding bonds and fixed-income funds, Thomas said that while they're "not dead," investors should think about why fixed-income is used, which is for steady, consistent payouts. He added that investors could look to diversified dividend funds to supplement income and diversify from fixed-income. -- Written by Bret Kenwell in Petoskey, Mich. Follow @BretKenwell
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