Pointing out how exchange-traded funds encourage short-term trading and are increasingly focusing on narrow sectors of the market, Vanguard founder John Bogle is again railing against the increasingly popular investment vehicles, Bloomberg reports.
Bogle calls the vehicles a “U-turn for the worse” in the evolution of index funds and notes how 38% of the $900 billion invested in index funds is in ETFs, up from just 9% at the end of the 1990s.
“Classic indexing has been overwhelmed by what I call indexing nouveau, represented by the ETF,” Bogle said in a recent speech. “The flow into style, sector and foreign funds has overwhelmed the flow into the broad stock market index component. We’ve moved a long, long way from classic indexing.”
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