David Kirkpatrick

November 7, 2009

Do exchange-traded funds create investment bubbles?

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 6:30 pm

More specifically, bubbles in emerging markets — short answer, no.

From the link, a bit more behind the short answer:

So what does all this mean for investors? ETFs probably haven’t caused a bubble, and they might even help a bit to prevent one from forming. But many will remain superconcentrated bets on very risky markets. If you invest in an ETF with most of its assets in a few stocks and think you have made a diversified bet, the real bubble is the one between your own ears.

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