ETF Investors Have Much To Be Thankful For This Year

As the Thanksgiving holiday takes over and the markets quietly glide into December, it’s a perfect time to reflect on all that ETF investors have to be thankful for this year.

For the most part, investors are drawn to ETFs because of their diversity, liquidity, transparency, tax efficiency and low cost. These vehicles now represent nearly $2 trillion in total assets after having accumulated $187 billion in new money this year alone.

In addition, there have been 184 new ETFs released in 2014, bringing the total universe to 1,450 individual exchange-traded funds offered on domestic markets. That’s a strong vote of confidence by both retail and professional investors who have continued to shy away from traditional fee-heavy mutual funds.

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Gratification for stocks and bonds at new highs is certainly worth noting this year as asset prices have risen in conjunction with the U.S. economic recovery. The widely followed SPDR S&P 500 ETF SPY has gained 12 percent in total return as we sit down to feast on turkey and stuffing.

While those gains in large-cap stocks are undoubtedly cheerful, individual sector and niche ETFs have experienced even stronger returns.

The top-performing single country in 2014 has been India, with the Market Vectors India Small-Cap ETF SCIF sitting on a gain of 49 percent. This ETF tracks 100 small-cap companies in India with direct exposure to the growing middle class and economic reforms that have contributed to this price appreciation.

From a sector standpoint, the First Trust NYSE Arca Biotechnology Index Fund FBT has dominated with a return of 47 percent this year. Biotechnology stocks have benefited from significant merger and acquisition activity this year along with a tailwind from healthcare concerns. FBT tracks a focused mix of 30 biotech stocks with an equal-weighted distribution of assets, giving smaller companies a great pull on the index.

Ultimately, those that invest heavily in ETFs should feel satisfied that 2014 has offered the biggest lineup of funds along with some of the lowest index costs in the industry. The continued proliferation of these tools will only contribute to better strategies and enhanced returns for years to come.