Exchange-traded funds are all the craze and new ones are coming out of the woodwork daily. But do investors really know what they’re buying in a hedge replication strategy or an Eastern European index fund?
Vedran Vuk, a senior analyst at Casey Research, is looking to give investors some insight on ETFs by compiling a list of the Top 10 Misleading ETFs.
According to Vuk, few investors closely investigate the holdings or the mechanics of their ETFs and the fund names make things even more confusing. “For many ETFs, a fund name has absolutely nothing to do with its contents. It’s easy for an investor slacking on due diligence to get misled,” he wrote.
However, Vuk added that just because some of the funds on the list are misleading doesn’t necessarily mean that they’re all bad. “The key point is that you have to first understand an investment before you can decide whether to make it a part of your portfolio. And though ETF companies will make the information easily available, they surely won’t highlight the biggest flaws and inconsistencies in their funds,” he wrote.
Hung Tran writes for Money Management Executive.