Mutual Funds Losing the Battle with ETFs

The Forbes mutual fund panel recently gathered to discuss the pros and cons of ETFs. The discussion is summarized in the article ETFs Ascendant.

TFS Capital portfolio manager Richard Gates makes a solid case for ETFs replacing mutual funds in his observation that “studies continue to show that mutual funds–in general, on average–don’t add much value above throwing darts”.

Gates went up against 3 mutual fund industry panelists who ineffectively tried to make the case against ETFs with paternalistic and condescending arguments such as “(an ETF) creates the potential for many retail investors to make emotional decisions…”

Gates believes that ETFs will gain further ground in 2009 due to “a general movement toward more active asset-allocation strategies in general in the registered investment adviser and broker world, given what happened in 2008″.

For a complete listing of ETFs by asset class, see the ETF Directory.

Updated on February 16 to correct the spelling of Mr. Gates’ name.

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