ETFs and Investment Fads

Be careful chasing the latest investment fads with exchange traded funds.

That’s the message from Forbes’ David Randall in the article Rearview ETFs.  Randall writes that the ETF industry has launched ten emerging market funds and another eight single emerging country funds since the beginning of last year.  All of this activity took place in a period where emerging market funds returned 80%.

However, investors who are late to the game have been disappointed with emerging market funds declining 5% so far this year.

Randall highlights Global Shares FTSE Emerging Markets Fund (GSR) and Market Vectors Poland ETF (PLND) as examples of the emerging markets trend.  Randall also warns investors to be on the lookout for funds with low trading volume and large bid-ask spreads.  One example, the Global X FTSE Nordic 30 (GXF) which has only $4 million in assets and a recent bid-ask spread of 1.85%.

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