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Dave Nadig
3:24
Not to harp on it -- but these recent Innovator defined outcome ETFs.
They'd get the "Exchange Traded Instrument" designation, I believe, and I could see that getting them pushed off of certain platforms.
3:25
When in fact, their outcome pattern is LOWER risk than the underlying equity markets.
So -- pros and cons there.  But if it adds SOME level of clarity, thats a good thing.
here's the letter, FWIW:
J. Gross
3:26
Given that fidelity now has index mutual funds at zero bps and schwab, ishares, and vanguard have not responded, do you think these other firms are thinking "decreasing expense ratios by one or two bps is no longer going to cut it, we have to come up with something bigger". Do you expect ishares, schwab, or vanguard to announce something big in response?
Dave Nadig
3:26
The big reason Fidelity can/wants to do the "zero" thing is because you can only access those funds from your fidelity accoutn.
That means Fidelity knows who you are, and can sell you other things.
3:27
This isn't how ETFs work.  You can't make your ETF "not available" to certain venues.  That's the whole point of trading openly on an exchange.
And in fact, its basically impossible for, say, Blackrock, to know with certainty if I happen to own any of their shares in my Schwab account.
So I don't expect a rash of zero-priced ETFs.
3:28
I think there's a point of diminishing returns.  Cutting from 5 to 4 basis points verges on irrelevance, even if you have a million dollar position.
We'll continue to see compression, but I think the floor remains the floor, essentially.
One or two? Maybe, but not a flood.
Fran Thompsen
3:29
Hi Dave, Would you ever want to hold office, like Fed Chair? :)
Dave Nadig
3:29
Hilarious question Fran.  And NOPE!  There simply HAVE to be better qualified people!!!
Marvin
3:29
Is tehre a difference beweeen defined-maturity ETFS and target-date ETFs?
Dave Nadig
3:29
Well, sort uf?
3:30
A defined maturity ETF -- like a bulletshare bond ETF -- simply goes away on a given date (like a bond does).  Technically, thats what a target date fund does too (there are no target date ETFs left anymore to my recollection).
But a target date fund -- traditionally used in retirement accounts -- owns a mix of assets and then changes the mix on a glidepath, getting less risky as the target date approaches.
3:31
the idea is to automate what most investors should do with their retirement accounts -- get more risky up front, less risky as you get close to retirement.
a target maturity bond ETF is designed to replace individual bonds, so you can do bond laddering or liability matching.
great question though.
Bhuvan
3:31
Hi Dave, have a really rudimentary question. How is the issue price of an ETF decided when it is being launched. Any links where I can understand more about this? Thank you.
Dave Nadig
3:32
This is actually entirely up to the issuer.
if a fund comes to market with, say, 10 million dollars in seed funding, they could choose to price that at 10 dollars a share, and thus issue 100,000 shares.
or they could price it at $20 a share, and issue 50,000 shares.
3:33
generally, you see most funds come to market around $25 -- its small enough for a mom and pop investor to get in, but big enough that institutions don't get scared off.
3:34
Exchanges have rules about small values - like sub-dollar -- and too big you end up scaring off little folks.
but it's essentially a marketing decision.
Sadie T.
3:34
Hi Dave, Of the 6 factors, is there one that seems to take greater precedence, or does it just depend on, e.g., what you most want exposure to, or how you want to position your portfolio?
Dave Nadig
3:35
Great question: the six generally accepted factors being Size, Momentum, Value, Growth, Quality, Volatility -- although people sometimes swap in all sorts of things, like liquidity, and so on.
Research would suggest (and Rob Arnott would argue!) that Value is kind of the "ur factor"
but they're all quite cyclical.
3:36
the reason we tend to look at these is they seem to be less correlated than the 4000 other factors academics have tried to identify.
RC
3:37
Which oil tracker product do you like: oilx,oilb, oilk, nothing else?
Dave Nadig
3:37
So, not going to pick a hard favorite here -- there are real pros and cons.  THe things to consider though are:
ETNS - like OILB - can give you a better tax treatment if you hold them for a while.
3:38
Optimized funds - like DBO - are trying to profit from the structure of the market itself.
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