ETFs Continue To Take Market Share.

From the Street.com's contributor Don Dion on ETFs.

"Within the next few years, exchange-traded funds will likely overwhelm a sizeable chunk of the mutual fund universe, according to a recent study conducted by the research and consulting firm Novarica. The New-York based firm anticipates that by 2015, nearly half of all mutual funds will be replaced by their cost-efficient brethren. The number of mutual funds is projected to drop from 8,022 to 4,237, with assets falling from $9.0 trillion to $6.75 trillion over that period. Meanwhile, Novarica anticipates a steep increase in ETF quantity (up to 2,618 from 728) and assets ($500 billion to $1.15 trillion).
To account for these ambitious predictions, Novarica has pointed to the cost-effective and transparent qualities of ETF securities. For instance, ETFs trade throughout the day, as opposed to being limited to single daily trading values with mutual funds. Furthermore, passively managed exchange-traded funds commonly offer lower expense ratios than their mutual fund equivalents. All in all, these savings net superior long-term portfolio performance, and that may help explain Novarica's extreme statistical projections.
As of 2009, Novarica's findings do have some grounding. This year marked Pimco's transition into the ETF realm (Pimco's first ETF, the 1-3 Year U.S. Treasury Index Fund (TUZ) , hit markets in early June). Meanwhile, Charles Schwab (SCHW) carried out a preliminary filing for its first ETF this past January.
While a steady inflow of 25 ETFs per month (based on Novarica projections) may sound a bit overzealous, these firms have surely set the stage for a paradigm shift in investment preferences."

Link: http://www.thestreet.com/b/rmoney/etf/10542861.html

*Disclosure: We own many different ETFs for clients and personally in accounts. Charles Schwab & Co. also is the custodian for many of our client accounts.