RIA Rising

John Bogle Is Not Joining the ETF Stampede

Exchange traded funds are becoming a mainstay in portfolios managed by RIAs, valued for their liquidity, ease of access, transparency and (usually) low cost. Although the pace of growth has slowed in recent years —Morningstar says the industry grew at 12 percent last year, down from 22 percent in 2009—advisors are taking greater notice. In a Cerulli Associates survey, 53 percent of advisors said they expected to increase their ETF allocations in 2011 by more than 10 percent.

So it’s surprising to hear that John Bogle, founder of the Vanguard Group with its signature emphasis on cost-controlled investing, is dissing the market.

Bogle spoke at Bloomberg’s Portfolio Manager Mash-Up in Manhattan yesterday, and my colleague at Registered Rep., Diana Britton, was on hand. As she writes in her blog, Yield of Dreams, Bogle thinks the field is getting too crowded with ETFs:

“What must be obvious to everyone in this room is that ETFs are the best marketing innovation in the 21st century,” Bogle said. “The question we should be looking at is, are ETFs the greatest investing innovation in this century. And the evidence is overpowering that they are not.”

Wow. As Diana notes, even Vanguard itself runs 64 ETFs.

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