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Exchange-traded funds (ETFs) are great. They're packaged investment products that trade all day like stocks.
You can buy, sell, and short ETFs that track:
- all the major stock market indexes
- any and every industry group
- different investing styles
- commodities like oil, gas, gold and silver
- entire countries
Just about any asset class or portfolio product Wall Street thinks you want to trade or leverage your bets with – even inverse ETFs that go up when their underlying market indexes go down – they are all here.
ETFs are hot right now. So is passive investing.
They're so hot together that they're going to ignite the next market crash.
It's not a matter of if, it's a matter of when. And it has ETF sponsors and regulators worried to death.
Here's how bad it will get, what you need to know to protect yourself, and how to make a ton of money from the coming crash…
How Far ETFs Have Come
The first ETF in the United States was the SPDR S&P 500 ETF (NYSE Arca: SPY). It was launched in 1993 by State Street Global Advisors under the product label Standard & Poor's Depository Receipts (SPDRs).
Today, 80 ETF sponsors manage ETF fund families with almost $2.5 trillion in assets under management (AUM). But just three companies sponsor the vast majority of these funds.
BlackRock's ETF iShares products account for 39% of the market with AUM of over $1 trillion, the Vanguard Group has 23% of the market with $615 billion in AUM, and State Street Global Advisors has a 19% share of the market with $510 billion in assets under management. State Street has their SPDR products, of which $235 billion is in one ETF, the original SPY.
Together the "Big Three" control 82% of the ETF industry.
And now, everyone's trading ETFs, causing the market to grow explosively from 2002 through 2014.
Since 2009, trading volume in listed ETFs averaged 28% of the total consolidated dollar value of shares traded in the United States. According to Keefe Bruyette & Woods' ETF Spotlight Industry Update from Feb. 3, the dollar volume in 2016 was 29% of all shares… worth $91 billion per day.
Of the 25 largest ETFs (by AUM), 58% of trading volume is accounted for by institutions, with retail investors trading the remaining 48%.
To give you an idea of the scale, here are the top 10 most traded stocks by dollar volume in all of 2016 in reverse order:
10) Bank of America Corp. (NYSE: BAC) traded $423 billion in shares
9) Microsoft Corp. (Nasdaq: MSFT) traded $429 billion in shares
8) VanEck Vectors Gold Miners ETF (NYSE Arca: GDX) traded $470 billion in shares
7) iShares MSCI Emerging Markets ETF (NYSE Arca: EEM) traded $603 billion in shares
6) Amazon.com Inc. (Nasdaq: AMZN) traded $710 billion in shares
5) Facebook Inc. (Nasdaq: FB) traded $739 billion in shares
4) PowerShares QQQ Trust ETF…
About the Author
Shah Gilani is the Event Trading Specialist for Money Map Press. In Zenith Trading Circle Shah reveals the worst companies in the markets - right from his coveted Bankruptcy Almanac - and how readers can trade them over and over again for huge gains. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.