Don’t get distracted: ETFs emerge battle-tested again
Smart-phones have changed our lives for the better in countless ways. They've also ushered in new forms of distraction. As markets tumbled last week, investors flipping through their phones no doubt saw a flurry of sensational headlines about the influence that exchange-traded funds (ETFs) exerted on market prices. Avoiding distraction is important to meet long-term investment goals and to understand the real story about ETFs. Here are the facts: Sharp swings across global markets stoked heavy ETF trading volume but failed to produce an exodus from ETFs overall. Instead, we believe that ETFs helped investors transact smoothly and in large volume. Investors turned to ETFs during the commotion and, as one broker-dealer commentary noted, "ETFs are seen as a liquid hedging vehicle in times of stress" (source: Morgan Stanley ETF Desk Daily Trading Recap, Feb. 6, 2018).
Efficient transactionscommon with traditional ETFs Martin Index Investing Supports Vibrant Capital Markets 29.9 billion $28.1 billion $468 million More to the point, a BlackRock analysis of last week's trading showed that heavy secondary market trading was even more efficient than usual. Creations and redemptions resulted in just 3.86% of U.S. equity market trading over five sessions last week, down from an average of 4.32% in the 12 months ended in January. Martin Small is the Head of U.S. iShares and a regular contributor to The Blog .