Flaws in ETFs Highlighted

While sales of exchange-traded funds continue to soar, analysts are beginning to sound warnings about their increasing popularity. One of the latest salvos comes from Marketwatch, which notes that ETFs are increasingly becoming narrow niche.

In addition, many of the new benchmarks on which they are being based are new and do not have a proven track record. In addition, if an investor buys ETFs frequently, they incur the brokerage fees.

"What you save in tax efficiency and in the expense ratio, you lose, and then some, with every trade you make," noted Gregg Brewer, director of mutual fund resources at Value Line. "If you have a lot of money to move, like in an IRA rollover, an ETF might be the right choice, but if you are dollar-cost averaging trying to get to where you have a lot of money, the traditional fund will be the way to go."

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Money Management Executive
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