ETFs are popular with investors as they offer low fees and they don't have to pay a manager to pick stocks. However, ETFs are increasingly being based on new or custom-made indexes that have the elements of mutual funds, The Wall Street Journal reports. Some new ETFs are based on indexes that operate like traditional mutual funds by actively trying to pick winning stocks.
PowerShares Capital Management says the indexes tracked by many of their ETFs are designed to find stocks "that have the greatest potential for capital appreciation." Generally, most older indexes are designed to represent a market or segment of a market, and do not search for hot stocks.