There are now more ETFs than stocks in the US, and many of them aren’t vanilla
From sin stocks to K-pop, pets to extraterrestrial life… there’s an ETF for everything now.
According to Morningstar data first reported by Bloomberg last week, there are now some 4,400 exchange-traded funds listed in the US, surpassing the number of American public companies.
Remix market
Typically offering a tax efficient, flexible, and easy-to-access vehicle for investing, the ETF market has exploded, with more than 640 new ETFs launched this year — equivalent to about four per day — as investors have piled over $660 billion into the ETF market in the first seven months of this year.
As Tker.co’s Sam Ro comments, it’s like having “more recipes than there are ingredients” — just like how chicken can go great in a sandwich, or a roast dinner, or a spicy curry, now major stocks routinely find themselves in hundreds of ETFs. Apple, for example, is in a bunch of tech ETFs, US-based ETFs, dividend ETFs, and megacap ETFs, to name but a few.
The trailblazers of the ETF world, passive low-cost index-tracking funds like VOO or SPY, are still the biggest in the game. But what’s changed in recent years is that the recipes have been getting spicier.
As of July this year, 37% of all new money in the ETF world flew into active ETFs, compared to only 3% in 2015. Rather than track a simple benchmark or theme, managers of these funds make investment decisions in the hope of finding better returns. They also tend to charge higher fees.
Many of these active ETF strategies follow classic investing styles like value, momentum, or income. Others are getting creative with derivatives, or niche categories, like the politically conservative YALL or the “sin stocks” fund VICE. Some of the biggest, like Cathie Wood’s innovation-heavy ARKK, have experienced serious boom and bust periods.
Once hailed as a simple way to invest with just a few options, now there’s an ETF for everything... if you have the patience to trawl through all 4,400 of them to find it.
