Exchange-traded funds are variously seen as new products that will radically change the mutual fund industry or the latest novelty that will fleetingly appeal to fickle investors and then be forgotten.

Jack Bogle, former CEO and founder of the Vanguard Group of Malvern, Pa. and a pioneer in index investing, compared an exchange-traded fund to a "finely crafted shotgun" at a Morningstar conference late last month in Chicago. The shotgun could be used for "hunting, protection or suicide," he said. The average holding period for Nasdaq exchange-traded funds is only three days, suggesting that most investors have recently been using exchange-traded funds to commit suicide, Bogle said. The funds offer some enhancements over traditional index funds but foster market timing, he said.

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