Why BlackRock Is Calling For the Rise of the ETF

March 13, 2018 by Chris Lange

Exchange traded funds (ETFs) have become a growing trend over the course of the bull market. While many equities posted incredible gains during this time, ETFs were very powerful as well. In fact, there has been a growing sentiment among investors to move to a more passive investing style rather than trying to pick and choose individual stocks. ETFs allow for more diversification within a portfolio, with mitigated risk and an ease of trading.

Currently, one in three U.S. investors owns an ETF, according to BlackRock’s latest ETF Pulse Survey. That’s up from one in four last year. By 2020, BlackRock expects half of such investors to be making ETFs an integral part of how they build portfolios.

Blackrock believes the rise of ETFs is having a similar effect on investing. More people are choosing ETFs to actively pursue their goals. Also by tapping into ETFs, investors are more apt to pursue markets and strategies that were once available to only the most deep-pocketed professionals.

For the most part, mutual funds have far more assets than ETFs. And anyone on Wall Street could tell you that mutual funds have fallen out of favor in recent years. Although these two funds are similar in some regard, ETFs offer a greater deal of flexibility.

That added flexibility has played a role in the rising popularity of ETFs. Not to mention, the passive strategies that have come to be in vogue involving ETFs directly contrasts mutual funds, which tend to be actively managed.

As a result, more and more investors have been turning to ETFs to gain some more control over their portfolios. Martin Small, Head of U.S. and Canada iShares at BlackRock, detailed in a letter to investors:

As millions of people seek greater control over their financial futures, exchange traded funds have powerfully advanced the proposition of what it means to invest. ETFs aren’t just having a moment. They’re creating a movement.

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