The democratization of investing and the evolution of ETFs
The implications of the competitive landscape for ETFs are mixed. On one hand, they have truly democratized investing. Investors now have access to the benefits of financial markets in one instrument that provides diversification at very low fees. Recently advertised fees on broad-based bond funds have fallen to 3bps. On the other hand, ETF providers have been able to satisfy investor demand for increasingly specialized products even though the evidence suggests they underperform. Are investors becoming worse off due to the effectiveness of the marketing strategies by providers of specialized ETFs?