Announcer:
4 Your Money is brought to you by NelsonCorp Wealth Management.
Brandy Auterson-Hurst:
It’s now time for 4 Your Money. We’re joined by Nate Kreinbrink, financial Planner at NelsonCorp Wealth Management. Welcome back, Nate.
Nate Kreinbrink:
Thanks again for having me.
Brandy Auterson-Hurst:
So the investment marketplace keeps evolving and changing over time. What is a big change you’ve seen in recent years?
Nate Kreinbrink:
Well, like so many other things, the financial world is constantly changing. I mean, there’s new products, there’s new investment strategies that are coming out all the time. Now, one such trend is the usage of ETFs or exchange traded funds. So over the past decade, the usage of ETFs has continued to grow and there’s actually now more ETFs than stocks, which is what I’m showing here today in this chart that I brought along with us. So for folks who may not know, an ETF or exchange traded fund is like a basket of investments that trades on the stock market just like a stock.
So if you think about it like this, stocks are the individual ingredients. ETFs are the recipes that you can mix and match different stocks, bonds, or even commodities into one product. So what we’re looking at here on this chart is comparing the total number of US companies to ETFs going back to 2010. The blue line that you see there is the total number of stocks, where the red line is the total number of US ETFs. So as you can see, for a long time, the number of companies listed on the stock market was much higher than the number of ETFs. Now that trend has obviously reversed course over the past few years, which has illustrated there up in the upper right-hand corner. So really this tells us just how much demand there is from an investor for easier, more packaged ways to put their money to work.
Brandy Auterson-Hurst:
Okay. So what does this mean for investors? Is this a good thing then?
Nate Kreinbrink:
Well, I think overall it’s a good thing for investors as they have more choices than ever before. I mean, you can get an ETF for nearly anything. The flip side is though, because there’s so many choices, you have to use them wisely.
Past performance is no guarantee of future results. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal.
Indices mentioned are unmanaged and cannot be invested into directly.
This video includes a paid appearance.