Pointing out how exchange-traded funds encourage short-term trading and are increasingly focusing on narrow sectors of the market,
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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