ETF Land?… ETF Heaven? The future is bright, per iSectors and Vern Sumnicht
Posted on: 03/21/2017
“Trump Waiting Game Turns a Stock Picker’s Paradise Into ETF Land”
Active managers hold record amount of ETF assets, says Goldman
Exchange-traded funds account for more of U.S. daily trading
“I don’t think it’s an abdication of stock picking prowess to buy ETFs in this environment,” he said. “This is a story that’s not permanent. As soon as we get some resolution or clear lack of resolution to the macro policy, it will settle down and turn into a stock picker’s market.”
Sumnicht responds to this article (and commentary) as follows:
I doubt this is a short-term fad that will reverse anytime soon. Too many studies have simply provided empirical evidence that money managers (stock pickers) can’t outperform their benchmark indexes. ETFs are making it easier and cheaper to buy virtually any index. Especially in the large cap area where market inefficiencies are more difficult to find (i.e. S&P 500 index) and the index can be owned so inexpensively.
It isn’t too hard to understand why a manager would purchase an index ETF if he/she wants to own an allocation to large cap stocks. Knowing the cost of active money management verses an ETF and the questionable ability of active managers being able to outperform their benchmark indexes, I believe this trend of money managers using index ETFs will continue. As a matter of fact, I think this trend will grow in the future rather than revert to historical norms.
The premise that time and money is better spent on asset allocation research and analysis than on stock picking and market timing was the base that iSectors’ investment strategies were built on, more than 12 years ago.
This article supports iSectors’ belief that allocating portfolios among low correlated index ETFs is “The Future of Investing.”
Please comment below or contact Mr. Sumnicht for further information.