One of the latest trends in ETF investing is the proliferation of more and more complicated ETF products. An ETF has always been a very straightforward financial product as it just tracks the underlying asset.
Manipulations were not possible as the result of the ETF could be simply verified with the true value of the underlying asset. This has always been one of the big advantages of an ETF compared to investing in a mutual fund.
As a fund manager of an investment fund is always actively managing the fund it would be entirely possible that the results of the mutual or investment fund would be less than the market it was investing in.
If it would also remain a bit vague where the fund manager had put his or her money in (better said YOUR money) then things slip out of control. You would never know if you were just having bad luck or you were professionally ripped off.
With a plain and simple ETF you will always be able to check the price movement of the underlying assets so the chance of “foul play” or “ignorance” is not existent. Many investment funds have lost numerous customers through all these negative “surprises”.
The trend is moving towards too complicated ETF’s
I regret to notice that even in the simple and transparent world of ETF’s the trend is moving towards more complex products. I want to be very clear on this: I think it is a very bad trend. That is why I only will invest in ETF’s which results are to be checked simple and swift.
With ETF’s we are moving towards the old days of the investment funds: an exotic name, “proven” mega-returns of the last few years, a complicated story about where your money will be invested in and just hoping that an investor will donate his money out of profit motives without having a clue what exactly he or she is doing.
I am talking about ETF’s that combine for instance stocks and bonds spread out among many exotic countries. Just go and check the results then, an almost impossible quest.
I will not follow this new trend
My investing approach is simple and clear: If I want to invest in bonds I will just pick a bond ETF. Do I want to invest on a particular market I will just buy an ETF for that market. I will always go for clarity and transparency.
What is even more important to me: I am an active investor who wants to enter or exit a market with a reason. With a combined ETF that is impossible. You will never be able to respond on different market conditions in just one of the underlying assets.