If you have been a reader for any sustained period of time, you know my views on the growing dominance of ETF & computer based trading. Rather than buying individual stocks, much of the "fast" institutional money sweeps into ETFs and hence individual stock analysis has become a lot less relevant as every stock within an ETF gets bought or sold, if that is the flavor of the day. This is especially true in the commodity space - hence why almost always all the coal stocks move en masse, or all the natural gas stocks, or all the gold stocks. We see the same phenomenon in other sectors (financials, technology, et al) - and I think those who are ignoring this trend are not understanding the changing the landscape.

The Wall Street Journal posted a story about how the ETF growth is potentially going to reach a point of surpassing mutual funds. I think eventually this could happen but it really is 2 different audiences - most passive investors, aside from buying a broad index ETF are not going to be interested in 90% of the ETF products out there; they are geared more to the active trader or someone who wants specific niches. The other issue with ETFs are so many products - if you look at the volume on many ETFs they trade less than many small cap stocks. How many home builder ETF stocks do we need in a space with a dozen builders? How many coal ETFs will we need? etc. Last, some of the sub niches in the ETF world are way over the top - for example did you ever hear of WSI? I hope not - it was the FocusShares ISE-Revere Wal-Mart Supplier Index Fund (WSI). Thankfully it was taken behind the barn and shot. Many others are of similar ilk. That said, there is a case for many mutual funds to be blindfolded and handed a cigarette as well...

I continue to believe the "long only", "cash is trash", "always bet the markets go up" "buy and hold forever" model of mutual funds will continue to be challenged in the years to come. An industry with reached great heights in a once in a lifetime bull of 83-99 has not fared well since, and would not of fared well before 1983. (Feb 5, 2009: Mutual Funds Have Tough Decade)

• Exchange-traded funds pose a growing threat to the entrenched supremacy of mutual funds as more investors are drawn to these low-cost, passively managed vehicles, analysts say.
• "Mutual funds have a 69-year head start on ETFs and it is unlikely that ETFs will become bigger in terms of net assets anytime in the near to medium term," he wrote.