By Chad Creveling, CFA, and Peggy Creveling, CFA
In recent years, investors’ appetite for cheaper, passive ways to diversify has accelerated growth in the global exchange-traded fund (ETF) industry. According to industry data-provider ETFGI, total assets in ETF products surpassed $4 trillion as of May 2017 globally. Growth in ETF assets combined with frothy global markets has spawned an increasing amount of alarming press emerging over the safety of ETFs. The size of the industry, its largely passive investment style, lack of liquidity in underlying assets, uncertainty regarding how ETFs may perform in a market downturn, and even the potentiality of systemic risk have all been listed as reasons for concern. Investors are understandably nervous, and the obvious question is “Are ETFs safe investments?” The answer really depends on what type of ETF you own.