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Dave Nadig
12:21
It doesn't matter if there are better proxies for tech, it got a reputation as being "tech cash" and it STILL gets used that way across trading desks.  Ditto GLD, HACK, SPY and so on.
12:22
So it's not the "cute" that matters, it's the representation.
12:23
I remember when Wisdomtree was putting up billboards with DXJ on them talking about "Japan without the Yen."  It was super effective, and I think it locked that investment thesis to the DXJ ticker with authority.
I think you could launch a competitor that was at zero basis points, and DXJ would STILL be the goto ticker for that investment meme.
OK one or two more questions here ... sorry if I miss your question, but we'll be doing this every so often!
Beth
12:24
Aren't ETFs more risky?
Dave Nadig
12:24
Well, that's a big loaded question ain't it (grin).
I'm going to assume the implied "... than mutual funds" here.
12:25
So the short answer would be no, not if you pay attention.  If you put an S&P 500 mutual fund and ETF next to each other, the performance expectations  - both risk and rewards - will be identical.  The ETF will likely pay out less in capital gains, but assuming you were in a tax deferred account, there's no difference -- except ...
... for trading
12:26
IF you go out of your way to trade the ETF poorly, yes, you are exposed to an execution risk you dont have in a mutual fund if you just put in an order and buy at the end of the day.
But there's a flip side to that -- if you put in your mutual fund order at 3PM, you have NO IDEA what price you're getting at 4PM.  So you're takign on timing risk instead of execution risk.
12:27
personally, I like risks I can control, and execution risk is very managable: use limit orders near fair value.
OK, last question, lemme find a good one here
ClockworkAngelInvestor
12:27
What do you think of AI-driven ETFs (like AEIQ, etc)? Is Skynet the next big thing in active management?
Dave Nadig
12:28
Skynet!  Oh lord.
lol
I think AI systems in investing are super interesting, but I also think markets are much more complex than people realize.
there's nothing really new here -- AI is just algos by a different name.
12:29
There has for sure been a lot of progress in natural learning -- AI's can learn how to beat people at games now that they used to have to be preprogrammed for.
but all of that activity -- the buying and selling implied  by USING an AI -- all becomes part of the very system it's trying to game.  It's a reflexivity issue.
12:30
So while I think its interesting, I also believe that there's some inescapable math -- security prices are always a zero sum game.
every buy is a sell, etc..
So will AI be better than a BAD active manager?  Sure.  But so will passive.
12:31
the question really is -- are we getting any better at culling out the bad active managers from the system.
Based on the quarterly S&P Index vs Active reports, it sure don't look like it.
OK, with that, I think we're a wrap.
We'll be shooting to do this every thursday around 11:30, openning up for questions 2 hours ahead of time.
12:32
We'll also publish a transcript of this live chat shortly at ETF.com.
Thanks everyone for the fun questions, and we hope you found this a useful diversion.
(This URL should magically BECOME the transcript as well)
If anyone wants to give me any feedback, you can reach me at dnadig@etf.com, or on twitter @DaveNadig.  Have a great day folks.
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