In finance, the term ETF stands for exchange-traded fund. ETFs are listed on stock exchanges and can be traded like stocks, but their value also relates to the worth of a commodity, index, or group of assets like a mutual fund. The first ETFs appeared in the 1980s, but they did not become popular until later years. The oldest surviving ETF dates to 1993, and in 2011, more than 1,100 ETFs managed over $1 trillion in assets.
Though ETFs offer many investment advantages, including flexibility, strong long-term performance, and tax efficiency, they also have their weaknesses. Some nontraditional ETFs rely on derivatives and can be very risky investments. Others have specific goals that may not match up with an investor’s. Some ETFs may also be difficult to unload if the overall market begins a swift downturn.
About the Author:
Stephen Roussin possesses more than two decades of expertise in wealth and asset management, including direct experience overseeing ETFs at UBS. He presently serves as President of Campbell & Company.
U.S. economic experts have been analyzing the statistics for the first quarter of 2012. Stephen Roussin, a financial manager with over 25 years of experience, answered questions about the financial outlook for the United States.
Question: Is the economy growing or contracting? Is the recession over?
Stephen Roussin: The manufacturing sector, which makes up 12% of the U.S. economy, has been doing well. However, manufacturers warn that both China and the European Union are on the verge of economic crisis, which would lead to lower demand for U.S. products. Still, for the time being manufacturing looks good and factories are beginning to put people back to work.
Question: What about other sectors of the economy?
Stephen Roussin: That’s where things get a bit messier. The service sector is stagnant. That’s a problem, because before the recession the service sector was one of the fastest-growing segments of our economy. While consumers have begun to spend on durable goods again, they’re still not spending money on services. Construction also remains stagnant. So what we’ve got is a weak recovery which depends on continued stability in China and Europe.
In the second part of this article, Stephen Roussin will discuss why the current recovery has been so sluggish.