I Read therefore I Write : Next Financial Crisis May Cause by ETF


On 19th April , The Business Time published an article on issues related to ETF , “ Vanguard is growing faster than everybody else , combined !! “.

No doubt , ETF which is tracking indexes from all over the world is getting so popular because of lower cost as compare to active management.

“In the last three calendar years, investors sank USD$823 billion into Vanguard Funds , by any measure , these are staggering figures. Vanguard’s asset under management have skyrocketed to USD4.2 trillion from USD 1 trillion seven years ago. “ according to the company.


“Flow of this magnitude into one company are unprecedented, the triumph of index fund investing means Vanguard’s traders funnel as much as USD 2 billion a day into stocks like Apple, Microsoft and Amazon as well as thousands of smaller companies that the firm’s fleet of fund.”




With such scale and magnitude , some analyst start to think and called for more cautious  approach on ETF as it may be the cause for “ next systematic risk of financial crisis “, as highlighted by below article from Chris Gilchrist :

ETFs could be next for a meltdown



Some are saying that EFT indexing has been pushing the stock price without any other reason than just “buying “…


1 reason to beware index funds from The Motley Fool

 


......and the verdict is BOJ has become the No1 shareholder of Nikkei 225  due to their stimulus program in buying up Index ETF to boost the economy and increase liquidity.


The Bank of Japan's Unstoppable Rise to Shareholder No. 1, from Bloomberg

 

Many market analyst or experts have also warned the impact of ETF on market volatility :

 Debate intensifies over ETFs’ impact on markets , from Financial Times



What will happen if everyone is panic and try to get out of the market by selling their ETF at the same time ?

 


Do ETFs cause volatility? , from CNBC





Just be cautious about market’s reaction when everyone is so fancy about investing in ETF.



Cheers !!




"You get recessions, you have stock market declines. If you don't understand that's going to happen, then you're not ready, you won't do well in the markets. " Peter Lynch

Comments

  1. Let think how to profit from ETF Bubble burst!

    ReplyDelete
    Replies
    1. Yah! Always be ready for any market down cycle...having some war chests in hand ,,, sometimes, crisis = opportunity,,,if we know how to play the game...👍👍
      Cheers ! 😀😀😀

      Delete
  2. There is no shortage of stocks in the stock market, which has given returns to investors many times. If at the current levels you are also looking for the next multibagger stocks, then know which stocks can be the next multi bagger stock according to the experts.

    ReplyDelete
  3. Hi STE,

    I think that the trend towards ETF investing could also be attributed, however small, to books that new investors read. Most books I have read extols the benefits of ETFs over unit trusts and individual stock picking. Without having any investing experience, new investors jump into the ETF bandwagon without fully knowing the risks.

    I have tried searching for the "weaknesses" of ETF investing before, but all I have found are articles promoting that ETFs are bao jiak one -.-

    ReplyDelete
    Replies
    1. Hi UN,
      Yah ! You are absolutely right in pointing out that the fancy of ETF might due to "trend and hype" as investors or adviser are promoting this relentlessly ...as investing is a very long journey and without understanding the RISK of market swing ...investing in ETF in short term may also seeing the loss of more than -20-30% at any one time ,, can investors bear such RISK of losing money in such magnitude in investing in ETF ?
      Yet to see ... :-) ... cheers !!

      Delete
  4. "What will happen if everyone is panic and try to get out of the market by selling their ETF at the same time ?"

    I'm also trying to figure out what would cause everyone to try to get out of ETFs at the same time.
    It's always calm before the storm.
    But when it's stormy, it'd be too late to get out

    ReplyDelete
    Replies
    1. Yah ! Market move in cycle,,,, and always calm before the storm !!! One should always be ready with some war chest ,,,to take advantage on market volatility during crisis!!!
      Cheers !! :-)

      Delete

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