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Debate: Are ETFs ‘Great Opportunities’ or Just Too Risky?

Assets held in exchange traded funds rose nearly 40% last year. Is the ETF market growing too quickly and becoming a risky investment? Michael Maiello, associate editor at Forbes, and Tom Lydon, editor of ETFtrends.com, debated the issue on “Morning Call.”

“These are evil traded funds,” Maiello told CNBC’s Liz Claman. He believes there are too many products on the market and that ETFs are too risky. “These are getting the retail investor to do things that they’d never do and really shouldn’t even think about doing.” He believes that investors should avoid ETFs, and predicts that in five year’s time, “we will see a bunch of lawsuits for suitability. Basically these ETFs are being sold on back-tested data and they are not going to live up.”

Lyndon sees ETFs as one of the best “evolutionary” tools in the investment field. He pointed out that “there are just 4% of ETFs in all mutual fund assets. It’s just a small part of what’s going on.” He predicted a continuing boom: “ETFs will continue to be great opportunities for investors,” said Lyndon.