In case you missed it – John Bogle was recently criticized for supposedly stating that ETFs are bad for the investment world. But Bogle’s comments were very specific. Bogle doesn’t think ETFs are necessarily bad for the investment world. He thinks they can be abused though and that many of the products that have come out in recent years are based on nothing more than a marketing pitch inside of a vehicle that sucks fees while failing to provide what it promises. I think there’s a lot of truth to that view.
The following comments nicely summarize his views:
” . . . I remain positive on the (ETF) concept, but only when (a) the right kinds of ETFs are used; and (b) used for investment and not speculation. I’m decidedly negative about the remarkable range of foolish extremes that have characterized their implementation.”
“ETFs have become a means for hedge funds to speculate on the market throughout the trading day . . . Like a hyperactive child, the finance sector can never let a good thing be . . .”
I’ve often described the ETF as the “greatest marketing innovation” of the fund industry so far in the twenty-first century. I stand by that statement….whether it is the greatest investment innovation remains to be seen.”
The ETF world provides investors (really savers) with options and flexibility. Unfortunately, that flexibility is often abused or misunderstood. While I agree with most of what Mr. Bogle says, I think he’s wrong that ETFs are not the greatest investment innovation of the 21st century. Personally, I think ETFs will slowly kill off the mutual fund and hedge fund businesses as more and more people realize the greater fee efficiency, tax efficiency and general flexibility they provide.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.