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Tax-Sensitive
3:12
Hi Dave, wondering what cap-gain distributions might look like for products like the new Innovator ETFs, which have underlying positions of options?  Also, what to expect in smart-beta products that adjust underlying positions more frequently than a typical index tracker like VOO?  If held outside of an IRA, would these carry higher tax liability than what we may expect from ETFs?
Dave Nadig
3:12
SUPER interesting question I had not actually thought about.  But basically, I would expect:
3:14
Because the funds essentially get all their exposures synthetically, the tax treatment will be just the same as the options themselves.
3:15
which means since they "come due" quickly, you're going to get short term gains, which will get taxed as ordinary income for most US investors.
So they may not be the most tax efficient way to get raw market exposure
of course, if you are in the "buffer state" where the fund has protected you from a significant loss, you're more than happy.
3:16
Its possible that I'm missing something
but I think thats correct, but I'm going to triple check it.
Trace Kinsman
3:16
Do ETFs in your portfolio need to be monitored, kinda unlike stocks, or are they good vehicles for retirement?
Dave Nadig
3:16
Hi Trace:  so the short answer is "it depends on the kind of ETF"
If you are holding, say, SPY, which is the S&P 500, the question to ask yourself is "how often do I need to check on the market, in general"
3:17
Personally, I try to ignore my portfolio as much as possible. But for some folks, they might feel the need to stay on top of their overall market exposure all the time
3:18
Of course, if you're talking about, I dunno, investing in leveraged oil futures, or a narrow thematic ETF, like say MJ, the Cannabis ETF, you are probably going to be paying a LOT of attention.
So focus on the underlying, not the fact that it's an ETF.
the ETF is just a wrapper, like a mutual fund.
Megan Janus
3:18
Supposedly October is always volatile for markets. 1) Why? 2) What ETFs really jumped/tanked so far this month due to this?
Dave Nadig
3:18
Hi Megan!  I love this question.
Im going to focus on the first part.  We post the "winners/losers" on the website all the time.
3:19
but the October thing turns out to be mostly a myth.  Barry at Ritholtz wrote about this just a bit agoL
3:20
it turns out if you could invest in ONLY octobers, your better off than other month you could do that with.
The reason we fear october is because of 1929 and  1987
3:21
So, don't fear the October!  Or any other month for that matter!
Ralph Loader
3:21
Dave, Thinking about costs of ETFs I have encountered (this in the case of a Vanguard Global Equity product in the UK market) "Product Costs", (22 bps) "Service Costs" (15 bps) and "Transaction Costs" (est. 10 bps). If I want to draw fair cost comparisons between equivalent products, should I ask providers to define these three costs in every case? Are there other costs that I should consider?
Dave Nadig
3:21
Hi Ralph. So I'll back up a second for our non-UK readers.
I am pretty sure what you're talking about is three somewhat related things.
3:22
THe first one is the actual expense ratio of the funds.  That's super easy to find (on issuer websites, or here at ETF.com for the US. or at JustETfs.com for UCITS funds, etc).
and its pretty universally complete -- meaning whatever market your in, you can usually find that data point and its accurate.
3:23
the second thing, "Service Costs" is a bit unique to the UK.  That's actually a fee being charged by your BROKERAGE for the privilege of having an account with them.
Thats essentially unheard of in the U.S. -- the closest equivalent would be the fee paid to something like a robo advisor here.
I'm pretty certain not all firms charge a flat fee, but I do believe Vanguard's brokerage arm does.  But you could buy that Vanguard fund through a different brokerage.
3:24
the last, the transaction costs, is really entirely dependant on your personal trading.
Part of it is headline commissions - which could be anything from nothing to $50 or more.
The other part is the spread you pay getting in and out.
Both are time dependant.  If you buy once and sell 20 years from now, it's irrelevant
3:25
if you daytrade, it will dwarf the expense ratio of the fund.
Importantly, the actual ETF issuer ONLY controls the first fee-- the actual expense ratio.
the rest is about where you chose to hold your money - the brokerage environment.
Rich Martin
3:25
What ETF most surprised you that it closed?
Dave Nadig
3:25
ANother super fun question.  I have an easy answer.
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