According to Eric Balchunas, senior ETF analyst at Bloomberg, the growth of ETF categories is often characterized by a pattern of “two steps forward, one step back.” Balchunas explains that this cyclical nature is a natural part of the maturation process for many ETF categories.
He notes, “Nothing goes up in a straight line – flow-wise – ever because ETFs service long term investors and traders.” This ebb and flow of investor interest and market activity helps to shape and define the various ETF categories over time.
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As new ETF categories emerge and gain popularity, they may experience periods of rapid growth followed by periods of consolidation or reevaluation. This dynamic process reflects the evolving needs and preferences of investors in the marketplace.
By understanding and embracing this cycle of growth and adjustment, investors can navigate the complexities of the ETF landscape more effectively. Balchunas suggests that maintaining a long-term perspective is key when investing in ETFs, as market fluctuations and shifts in investor sentiment are to be expected.
