Charles Schwab conducted a study that found a 22% rise in demand for ETFs from last year. According to Schwab’s 2013 ETF Investor Study, half of all respondents plan to increase their ETF holdings over the next year. The study also found that cost and fees are among the most concerning factors for investors – the idea of adding trade commissions on top of expense ratios gives many people pause. Despite the fact that an increasing number of investors are looking to move into ETFs, many also respondents also felt that they had a fairly limited understanding of ETFs, evidenced by the fact that 57% of those surveyed believed “ETF” stood for “Easily Traded Funds”. While this is actually not a bad way to think about an ETF, we do suggest knowing the name of the product before investing.
There have been a slew of low volatility mutual funds launched recently, most notably Vanguard’s Global Minimum Volatility Fund and Invesco’s Low Volatility Emerging Markets fund, both set to be raised by the end of the year. Low volatility funds have seen a wild increase in popularity following the financial crisis, as investors seek to find ways to better protect themselves from the ebbs and flows of the market. One of the primary challenges these actively managed funds face is whether or not they will be able to pull assets away from existing low-cost ETFs.
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