Boy, the world of exchange-traded funds (ETFs) sure has changed a lot. Back in 1993, the first ETFs launched on the American Stock Exchange were the S&P Depositary Receipts
Today, though, ETFs have become hot, hot, hot. Follow them in the news, and you'll regularly see announcements of new offerings. Whereas ETFs previously allowed you to invest just in broad indexes, today they run the gamut of specialties and niches. This is good news for many sophisticated investors (and those who think of themselves as sophisticated investors), but it can spell danger for those who might end up in over their heads. For many of us, a simple S&P 500 index ETF is all we need.
But what's new, you ask? Well, new from Rydex Investments, for example, are ETFs that track foreign currencies. If you're bullish on the euro, you can invest in the Euro Currency Trust
Meanwhile, investors can now short the market (i.e., bet against it) via the Short QQQ ProShares
ETFs also let investors focus on specific sectors, such as oil-drilling or retailers. But here's a useful caution from Dan Culloton of Morningstar:
Even though it is the world's largest retailer, Wal-Mart
This drives home the point that you shouldn't expect ETF investing to be simple, once you stray from basic broad indexes. ETFs can make great sense for some investors, but do your research before buying. You can learn more in the Fool's ETF Center. It features info on how ETFs stack up against mutual funds, how to develop an investment strategy with ETFs, what pitfalls to avoid, and how to avoid ETF imposters.
These articles may also be of interest:
- Mutual Funds vs. ETFs
- Three Things to Know About Your ETF
- Buy the Whole Mall
- The Age of the Exchange-Traded Fund
- ETFs and Falling Fund Fees