The stock market has done pretty well over the past 10 years. The S&P 500 is up 167% since the beginning of 2013. In fact, mutual funds and ETFs have created $11.1 trillion in shareholder value over the past decade, according to a recent analysis by Morningstar.
Morningstar recently ranked No. 1 15 Create wealth and Money that destroys wealth. Not surprisingly, the wealth-creating funds come from large, established companies, with 10 of the 15 funds being low-cost passive index funds. Top wealth-creating funds include Vanguard Total Stock Market Index Fund, SPDR S&P 500 ETF Trust, Fidelity 500 Index Fund, iShares Core S&P 500 ETF and Invesco’s QQQ Trust.
However, Morningstar found that some funds lost value to shareholders during the same period. While wealth creators tend to be larger, run-of-the-mill funds, wealth destroyers are smaller and more specialized.
Additionally, 14 of the 15 wealth destroyers are exchange-traded products.
Amy Arnott, portfolio strategist at Morningstar, said: “ETFs have many advantages, including low cost, tax efficiency and generally passive investment methods, making them suitable for building diversified portfolios. But they also have a dark side,” said the study’s authors. “ETFs often focus on narrow market sectors and asset classes, making them potentially dangerous when used by investors with speculative tendencies.”
Take the Ark Innovation ETF as an example. Morningstar found that the fund lost about $7.1 billion in wealth over the past 10 years.
