Because ETFs trade throughout the day like stocks rather than at the market's close, as with traditional mutual funds, Ahmed was able to more quickly shift ETF money to investments that potentially could perform well under a Trump administration.
While such liquidity is one of the reasons ETFs hold such big appeal for financial advisors, Ahmed and others say the popular investment option only makes sense for do-it-yourself investors if employed properly and vetted thoroughly.
"There's a lot of hype and excitement about them … but I wouldn't recommend them for the vast majority of investors unless you are very active about managing your portfolio and like to be a little speculative," said CFP Robert Schmansky, a personal financial advisor and founder of Clear Financial Advisors. He generally prefers mutual funds but uses ETFs for exposure to certain niche markets.
"And don't think of all ETFs as one homogenous investment type," he added.
With investors increasingly focused on investment costs, and a long-running bull market contributing to attractive gains in lower-cost passively managed index-based options, ETFs as a whole are pulling in more assets than traditional mutual funds.
Data from Morningstar show that for the month ended Nov. 30, ETFs pulled in nearly $51.7 billion in new money. Actively managed mutual funds — those headed by professional stock pickers — shed $67.8 billion. Index funds — passively managed but nevertheless traditional mutual funds — took in $19.7 billion.
The outflows for the year ended Nov. 30 reflect the shift from actively managed funds to passively managed investments: While $292 billion flowed out of actively managed mutual funds, ETFs attracted more than $268 billion and index funds saw inflows of $218 billion.