There might be a new market for exchange-traded funds (ETFs).
According to Matt Kaufman from Calamos Investments, there’s a lot of money sitting in CDs and money market accounts – trillions of dollars. This is a market that ETFs could try to get a piece of.
“That’s even bigger than the whole ETF market itself,” said Kaufman, who leads Calamos’s ETFs. He talked about this on CNBC’s “ETF Edge” show recently. “There’s a lot of money waiting to be invested.”
Kaufman thinks that since interest rates are likely to stay higher for a while, ETFs that are designed for managing risk and generating income could be a good idea.
“When interest rates were super low, it was hard to manage risk and make money from bonds,” he explained. “But now that rates have gone up from zero to 4 or 5%, we can offer protection for your money over time. And when we can do that, there are a lot of ways these products can be useful.”
In this kind of higher-rate situation, Kaufman said ETFs could be especially helpful for people who want to beat inflation – like retirees.
“You can earn more than what you’d get from a risk-free investment,” Kaufman pointed out. “Your money is tied to the market, but you won’t lose more than you put in. And it all grows without you having to pay taxes on it right away.”
Kaufman’s company, Calamos, has just started releasing a set of 12 new ETFs designed for protection and stability.
