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 :
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.
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.
"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