We had another ETF bonanza this year, as 135 new exchange-traded funds and notes entered the market so far in 2009. As usual, these new investments ran the gamut. Some broke entirely new ground for individual investors, such as iPath S&P 500 VIX Short-Term Futures ETN (VXX). Some covered the same asset classes we've seen dozens of times before but tried to do it better and cheaper, such as Schwab's new ETF lineup. Others rounded out the lineup of available ETFs with useful variations on existing products. A number just made us wonder why. (The much-mocked Oklahoma ETF (OOK) comes to mind). But that is a story for next week, when we review 2009 by the numbers and discuss some of the best, worst, and most interesting ETF developments from the past year. For this last article of the year, we are going to talk about the future.
Morningstar data shows 926 ETFs and ETNs currently trading in the U.S. market, an imposing variety. When fund companies start issuing index funds based on niches like Chinese technology firms, surely we've hit the limit of how global capital markets can be sliced and diced? Yet our team has identified three ideas for new index funds we would like to see in a liquid, ultra-low-cost ETF package. So here they are, our ideas for new ETFs we would like to see in 2010.
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Bradley Kay has a position in the following securities mentioned above: VIG. Find out about Morningstar’s editorial policies.