It's Not ETFs That Need Testing. It's Investors

The latest misdirected attack on exchange-traded funds centers on the assumption that they haven’t been tested in times of severe market stress. The issue has taken on more relevance as many brace for a correction in equities with the long bull run leaving valuations stretched.

This is yet another claim that can easily be refuted with some data, but I get why the myth exists. ETFs have gotten a lot of media coverage lately, so they probably seem new to many people. But they’ve been around for 25 years.

Since then, there’s been some $210 trillion of ETF shares traded, according to the New York Stock Exchange. With an estimated average trade size of about $22,000, that breaks down to just under 10 billion individual trades. In terms of customers served, those are McDonald's-level numbers. ETFs have survived the bursting of the internet bubble, Sept. 11, 2001, the worst financial crisis since the Great Depression, flash crashes, the Federal Reserve-induced "Taper Tantrum" of 2013, the U.K.'s "Brexit," Donald Trump's surprise presidential election win, and all sorts of minor market spasms and exchange glitches. The structure is durable.