Fewer mutual funds and more ETFs mean better options for investors


The number of mutual funds available to investors will contract in 2009. It will be the first time that there has been such a contraction since the carnage of the market after the internet bubble burst in 2002. At the same time, the market for ETFs is rapidly expanding due, in part, to lower management costs than many mutual funds offer and because ETFs have the flexibility to be traded throughout the day.

So far a total of 396 funds bit the dust in 2009, compared to 438 in all of 2008. But the big difference between the two years is that only 156 new funds have been launched so far in 2009, while 487 funds were launched in 2008.

For investors, fewer mutual funds is not necessarily a bad thing. Funds that close are bad performers and if they are no longer available, that means better options for investors.

Originally published