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<figure class="wp-block-pullquote"><blockquote><p>Tempted by high-flying ETFs in this aging bull market? Just remember… “Excitement is highest as the roller coaster goes over the top!”</p></blockquote></figure>
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<p>In today’s technologically advanced world, featuring self-driving cars, pilotless airplanes, and smart homes, a “hands-off” trend is also gaining popularity among the investing public. As indicated by the headlines below, passive index investing has become all the rage, and Exchange Traded Funds (ETFs) are the tool of choice:</p>
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<blockquote class="wp-block-quote has-text-align-right"><p><strong>ETFs could see $1 trillion in inflows over the coming year</strong></p><cite><em>MarketWatch – 1/31/17</em></cite></blockquote>
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<blockquote class="wp-block-quote has-text-align-right"><p><strong>Small investors’ move to ‘passive’ stock funds becomes a stampede</strong></p><cite><em>LA Times – 4/9/17</em></cite></blockquote>
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<blockquote class="wp-block-quote has-text-align-right"><p><strong>Global ETF assets reach $4tn</strong> <em>The global exchange traded fund industry smashed past $4tn in assets last month…</em></p><cite><em>Financial Times – 5/10/17</em></cite></blockquote>
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<p class="has-large-font-size">And our personal favorite</p>
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<blockquote class="wp-block-quote has-text-align-right"><p><strong>Wheee! A Quadruple-Leveraged S&amp;P 500 ETF is Here</strong></p><cite><em>Barron’s – 5/3/17</em></cite></blockquote>
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<p>The first Exchange Traded Fund (ETF) was launched in 1993, and although they were slow to start, ETFs have proliferated over the last decade, both in number (see graph at right) and the variety of index funds available. There’s now an ETF for nearly every strategy, no matter how esoteric, and that has helped fuel the passive investing craze.</p>
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<p class="has-large-font-size">Over the past 24 years, one can see the shift in interest from actively managed mutual funds toward passive investing. As shown in the graph at left, net cash flows into actively managed funds were still four times larger than passive funds from 1993 through 2000. From 2001 through 2008, a change becomes evident as net cash flows for active funds turned negative while passive funds continued to grow. The disparity between the active and passive net cash flows during the current bull market (2009-2016) is remarkable, and it shows why there’s been a parabolic increase in the number of ETFs!</p>
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