Mutual Funds are dinosaurs and many are becoming extinct like their dino counterparts and much of the mutual fund money is pouring into ETFs but will that ultimately lead into more volatility?

I think of Mutual Funds as dinosaurs because they often move in the same manner, for example if you decided to liquidate your holdings and they’re in a mutual fund, you can call your broker or log on to your account and click sell but it doesn’t happen instantly.  In some cases it could take days for the sell order to go through and liquidate your holdings.  Buying mutual funds is very similar but with ETF’s a sell order is a sell order and gets executed almost immediately.

Some ETFs also have options available on them allowing a buyer/seller to get in/out via options plays as well.   Both of these features in ETFs may ultimately make the stock market much more volatile in the long run as investors are able to liquidate or move nearly instantly instead of waiting a few days for transactions to take place.

This is comparable to the now gone “check float” where writing a check could take days before it cleared a bank but now it is cleared nearly instantly and a once loved “benefit” has disappeared.   Will ETFs lead to greater volatility and we’ll long for the days of mutual fund dinosaurs?   Only time will tell…..