A recent USA Today column asks: When are there too many ETFs? The author asserts that although ETFs are extremely popular and have many benefits, new funds often have to find niche strategies to gain market share since many popular investment areas are already well-saturated. As the article notes: “How many S&P 500 index ETFs do you need?” Many new ETFs differentiate themselves with unique features, such as leverage or a narrow focus on particular types of investments. The risk to investors, according to the author, is that if these new funds fail to gain enough trading volume, they may not be able to maintain a share price equivalent to its NAV. In addition, in the case of a fund liquidation, the remaining shareholders must pay for any associated costs. The full article is available here.
