Exchange-Traded Fund Industry in a State of Transition
The exchange-traded fund (ETF) industry is undergoing a major shift in the wake of the waning influence of Big Tech stocks. ETFs are financial instruments that track an index or a basket of assets and are traded on a stock exchange. As the industry transitions, experts point out that it is not all about the fees. There are also currency, trading costs, spreads, and tax considerations.
Yahoo Finance Live's Brian Sozzi recently broke down the stat of the day, noting that the S&P 500's 'FANG-era' is ending, with the waning influence of Big Tech stocks rippling through the exchange-traded fund industry. Wall Street has been on a tumultuous ride ahead of Christmas, but the weak trend might reverse in the last week of the year.
While actively managed ETFs, which are actively managed baskets of assets, are all the rage, passive funds still dominate total assets. This is despite the fact that the industry is undergoing a major shift.
Kathleen Moriarty, a lawyer who played an instrumental role in the creation of the first exchange-traded fund, recently passed away at the age of 69. She was widely credited with transforming the ETF industry and paving the way for the modern exchange-traded fund.
Cathie Wood's ARK Innovation exchange-traded fund also fell to a five-year low Tuesday. The fund, known by its ticker symbol ARKK, dropped 0.7%, one of the biggest one-day losses in its history.
This has been a terrible year for global markets. Hence, dividend ETFs have remained in vogue and would likely to be stars in 2023 as well. There's one upside to this year's terrible performance for most ETFs. It'll be easier to do better next year.
As the ETF industry transitions, it is important to consider the various factors at play, including fees, currency, trading costs, spreads, tax considerations, and the influence of Big Tech stocks. It is also important to remember the key figures who have played a role in the development of the industry, such as the late Kathleen Moriarty. Lastly, investors should be aware that dividend ETFs may be one of the stars of 2023.
