Bogle May Be Right About ETFs

Vanguard Group founder John Bogle created the first index funds available to individual investors in 1976, and ever since then he’s been a tireless champion of their use.

Given that passive ETFs can provide advantages—such as lower costs and greater tax efficiency—over index mutual funds, you might think that Bogle would be a big proponent of their use as well. Yet he warned investors that ETFs had a dark side. The ability to frequently trade them could tempt investors to do so far too often.

In fact, he warned investors that ETF trading is “no way to invest.” Bogle also warned investors against using ETFs that focus on narrow sectors of the market. And he warned that leveraged and inverse ETFs are where the “fruitcakes, nut cases and lunatic fringe” can be found.

So, is Bogle right to be concerned about individual investors misusing ETFs?

Read the rest of the article on ETF.com.

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