Despite predictions that the mutual fund industry would crumble, it continues to plod along steadily.
U.S. mutual funds ended August with $19.93 trillion assets under management, up from the $19.49 trillion of last year. It might be a slow rise but it’s definitely not crumbling.
Many have believed that the growing popularity of ETFs could only mean the downfall of mutual funds but the 345 new mutual funds launched last year versus the 247 ETFs launched tells a different story.
In a recent article, the Wall Street Journal explores a few reasons mutual funds remain popular:
- Employer-sponsored retirement plans – 80% of households that own mutual funds do so through these plans
- Name recognition – to many investors, ETFs are a bit of an unknown and may require additional research and education
Mutual funds vs ETFs – Which one is better?
This isn’t always a straightforward answer as both have pluses and minuses and investor goals, time frames, and risk allowance varies from one individual to another.
Both have positive and negative aspects that investors need to explore.
ETFs – A needed threat
Many wealth managers believe ETFs are bringing healthy competition to the market. Their mere existence forces “active managers at mutual funds to prove their merit.”
The pressure on mutual funds continues to increase as boomers age and access their retirement funds. Younger generations aren’t as heavily invested in mutual funds so the industry will gradually feel those hits.
You can find the full article here.