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Dave Nadig
3:12
ETFs are a bargain and a half there.
Amy Threadgill
3:12
Does a bull market or a bear market spark more inflows into ETFs, or is that moot due to, things like inverse/leveraged funds, shorting options, volatility, etc.?
Dave Nadig
3:12
Great question and one I've been getting a lot.  Barry Ritholtz actually did a great piece on this yesterday I believe.
Over at bloomberg.
3:13
But short answer: history would suggest that bear markets are actually, in the long run, very good for passive, and not so great for active/trading vehicles.
If you look at the response after 08/09, it was ETFs in a landslide.
3:14
but we saw similar (albeit smaller) samples after the dotcom crash (although there were only 100-200 ETFs back then).
Mostly what happens is - 70% of active managers get it wrong, 30% get it right and make new 10-year careers of having been right, and all those folks invested with the 70% start asking why they paid so much to be wrong
and those folks end up - a lot of them - over in index and ETF land.
3:15
I suspect that will almost always be the case.
Now, if we had a market structure issue that somehow featured ETFs in the headlines? sure, thats different.  But sustained bear markets? Regular old revaluation?  ETFs win.
Jon Martins
3:15
Hi Dave. Won't a bitcoin ETF be kind of the opposite of what bitcoin itself is supposed to be?
Dave Nadig
3:16
Hi Jon.  So I have heard this argument -- and actually the same one about gold.
If the "point" of owning Bitcoin is to have a reserve asset thats immune from modern financial systems -- having your bitcoin ETF shares custodied over at Schwab may not actually help you much.
Same with, say, your GLD.  You can't go get the ETF out of the safe and use it to pay for food, and so on.
3:17
That being said, I think theres enormous interest in Crypto, and it's just plain hard, and a bit scary, to start trading it on its own.
So there's HUGE appetite for people to get access through normal means -- witness the Swiss ETN thats now listed as a BB stock.  Buyer beware!!!
Loc
3:17
If I’m a student beginning to invest and every week I have $25, would buying ETFs through M1 Finance a way to go to? No commission on trade and auto rebalance and reinvestment, etc. PS: will you be playing Battle for Azeroth? Go horde!
Dave Nadig
3:18
Hey Loc - so sure, that's the whole pitck of someone like M1.  They basket up trades so dollar cost averaging works out a bit more cleanly.
I will say, though, that you could do this in a regular brokerage account using traditional index mutual funds, or using ETFs that don't trade with a comission.
You might have to wait a few weeks before making trades, but you could certainly do it.
Here's a related question:
mojo
3:18
triple play... what is direct indexing? how is it different than an index fund and why is wealthfront pushing it over ETFs?
Dave Nadig
3:19
To me this is the next logical step.  If someone like Wealthfront or M1 is essentially just a big broker, holding, say 1000, accounts, those 1000 accounts represent one big "portfolio" if you will.
3:20
If you don't care about intraday trading, there's no reason that they can't keep track of what piece of that "portfolio" is yours, and when you make changes, just roll those up to the big portfolio level.
So you "subscribe" to an index - like the S&P 500, and you give them $1,000.
They just add that notionally tiny position to the amount of each stock the big P portfolio needs to own today.
and keep track that you own .03 shares of Amazon, or whatnot.
3:21
To manage it, they just rade once a day, and "eat" the fact that there will always be a fractional share of missing exposure -- they own that extra in the house account, as it were.
why bother? It cuts a whole layer out of the investment process -- the ETF issuer.
You pay directly for the IP of the index you want, etc.
3:22
Nobody is REALLY doing this in a big way yet - Wealthfront, M1 are nibbling at the edges.
But I think if you look out long term, its highly logical.
Ben F.
3:22
Hi Dave. We keep seeing issuers like JP Morgan moving money out of iShares or Vanguard ETFs and into their proprietary funds, many brand new. Is there any downside here, or risk to advisors and investors whose assets are being shifted from established product to new product?
Dave Nadig
3:22
Hi Ben,
So funds like BBJP and today BBCA are getting big internalized flows from JPM clients and internal holders (other funds, for instance).
3:23
I don't think there's any risk that's new here other than whatever concern you might have about JPM (which, to be clear, I don't have).
But if this was "bobs donuts and ETFs" and you didn't believe they could manage an index fund? Well sure, that would be concerning, seeing a HUGE pile of money show up to some noname.
But NoName JP Morgan is not.
3:24
The only caveat is that Assets != Trading.  So you can end up with a billion dollar ETF thats still a bit tricky to trade.
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