A Real-Life Example

However, my most immediate and personal observation involves one of our newest clients.

She is someone who has spent nearly a quarter of a century in the mutual fund business. She recently made the decision to become a client because after further researching ETFs, she concluded they could be used to build a better portfolio.  

And since then, I believe she has seen firsthand how ETFs could positively impact her portfolio. During the intraday volatility on Nov. 13, as the S&P 500 pushed toward the 820 level, I purchased the iShares Global Infrastructure ETF (NYSE: IGF) for her account. By the end of the day, IGF closed almost 8% higher than our purchase price.

By being in an ETF, she was able to access a segment of the capital markets—infrastructure—where I am not aware of any comparable "pure-play" mutual fund.

Additionally, she was not tethered to an end-of-day closing price due to a lack of intraday liquidity, thus allowing her to take advantage of market volatility.

Reading about the benefits of ETFs is one thing. Seeing, in action, the power of ETFs in the portfolio construction process, as my client did with IGF in this instance, is another.

I like the 48 basis point iShares ETF we used. The client is happy. This is how 21^st-century investing is supposed to work.

What Next?

There is no question "change" is the order of the day in many respects. Within the capital markets, the last two months testify to that. In terms of the change going on in investor portfolios, is it possible we are just getting started?

What is the market share of ETFs? If my math is right based on current ICI data, it's around 8%. What will that figure be in five years or 10 years? I don't know. Nobody does. Only time will tell.

However, I do know our new client is not only a "newly minted ETF investor" but also an "ex-mutual fund investor."

She may be representative of a whole generation of ex-mutual fund investors who have, like Yogi, "looked around," seen the benefits of ETF portfolios and are now making a permanent "change" to an ETF solution.  

William Koehler is chief investment officer at ETF Portfolio Solutions. He's a regular contributor to IndexUniverse.com and can be reached at:  This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

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