The Triumph of Transparency

One of the best, ongoing success stories in the investment world is ETFs. At a time when Wall Street is under fire for creating opaquely complex products that even sophisticated investors didn’t fully understand, the unpretentious ETF continues to both attract assets and innovate, without straying from its heritage. The reason? Call it, the triumph of transparency.

ETFs inherently provide a level of portfolio transparency above and beyond nearly any other packaged investment product, especially in relation to their close counterparts — mutual funds. The majority of ETFs disclose their portfolio holdings at the end of each trading day. In contrast, mutual funds do so quarterly.

This means ETF investors are uniquely able to ascertain their exposure to a particular company or sector “on demand.” Consider the situation many investors faced during the financial crisis – mutual fund holders wondered if their 401(k)s and IRAs were invested in the likes of Lehman Brothers and Bear Stearns, whereas ETF investors had daily access to this critical information, allowing them to make instant, informed decisions about how to protect their assets. Continue Reading

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