“(T)he test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function.” – F. Scott Fitzgerald
The implications of the competitive landscape for ETFs are mixed. On one hand, they have truly democratized investing. Investors now have access to the benefits of financial markets in one instrument that provides diversification at very low fees. Recently advertised fees on broad-based bond funds have fallen to 3bps. On the other hand, ETF providers have been able to satisfy investor demand for increasingly specialized products even though the evidence suggests they underperform.
Broad-based asset class ETFs are essentially free. All the while active, specialized and thematic ETFs continue to come to market. (Of late we are seeing a surge in active bond ETFs.) The beauty of the situation is you can choose exactly what you want from the ETF market. Low costs, broad exposure, absolutely. Aside from a spot Bitcoin ETF, there is a good chance there is an ETF to scratch your itch.
Five some years ago I stated: keep ETFs weird. Here’s hoping thing stay weird for another five years.