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Dave Nadig
3:13
That is: they ask APs to simply hand them cash, and the fund does their own trading.
Thats not difficult with an active fund, because, hey, it's active.  They're gonna do their own trading anyway, all the time.
3:14
Sometimes, they do cash redeems as well, and sometimes its a mix (cash in, in-kind out).  It does vary quite a bit.
Of course, there's no structural reason this is different for active or passive.  A passive junk bond ETF can (and sometimes does) do cash in/out as well, and active funds can do baskets in/out.
3:15
As an investor, this doesn't matter all that much.  If you are SUPER concerned about the ongoing tracking error of your ETF, then cash makes that a bit harder.
But, the flip side is, funds with cash creation tend to trade tighter to fair value because the AP has so little risk to worry about, and much less to actually do.
THey don't need to go buy anything!
Most of the time though, it's really not an issue either way.
3:16
If a fund leans very heavily on cash creation/redemption, there's a risk of capital gains distributions, but that's true in fixed income in general, which tends to have higher turnover due to bonds maturing or "aging out" of the strategy.
Joe
3:17
you mentioned earlier you started investing with $5K, how would you do that today if you are just starting out, how would you spend that.... I'm at that place
Dave Nadig
3:17
So, this is tricky.  I genuinely believe that if you want to LEARN investing, the best thing to do is to learn how to analyse and trade individual stocks.
Do that till your very comfortable with it.
3:18
Then, slowly, learn how options work, because they're an underutilized tool for most small investors.
However you're nearly guaranteed to lose money vs. doing something much simpler.
And that simpler thing would be to simply but a cheap index fund or ETF that matches your risk tollerance and desire for involvement.
3:19
If you just want to stick it away and occasionally add to it, then you should get that money in a tax-deferred account like an IRA ASAP, and pick a target date mutual fund, and slowly add to it -- even 25 bucks a week.
but thats REALLY BORING
and you wont learn a thing.
Nemo
3:20
Can you speak to some methodology differences between the two major Fallen Angel bond ETFs. You've expressed interest in them several times generally reference the original: ANGL. When I've looked at FALN in the past I've seen lower duration and lower average credit quality. What constraints between the two funds account for these exposure differences?
Dave Nadig
3:20
So, I've been a fan of ANGL since it launched, but the reality of the two funds your mentioning here is that they are VERY VERY close in terms of the portfolios you end up with.
3:21
If you just do a quick side by side at etf.com/angl and etf.com/FALN you'll see nearly identical duration, yield, number of holdings, credit quality and so on.
Honestly the biggest difference between them right now is in favor of Blackrock's FALN, which is 10bps cheaper I think (let me look)
3:22
Yeah, 25 vs 35 bps.
I don't think you go wrong with either.  I think ANGL trades better, and certainly has the longer track record.
But you won't get really meaningful portfolio differences from the two.
Bill Donahue
3:22
Dave, Happy Holidays to you and your family. Which do you think will be approved first by the SEC...1. Non-transparent active ETFs  2. Bitcoin ETFs....
Dave Nadig
3:23
Hi Bill!  So, I would bet on Non Transparent Active first -- far fewer unknowns.
I've been wrong for years on this though, so take it with a grain of salt.
3:24
But I think Bitcoin has a longer row to hoe with the SEC.  THe NTA stuff is pretty much "done" it's just waiting for a positive nod.  I don't think there's much more work to be done, or an exogenous market condition that needs to resolve.
Todd Rosenbluth - CFRA Research
3:24
Hi Dave. Love these chats. While down from last year, do you think (as I do) the $300B cash haul of ETFs is a great sign of industry health given that US/intl equity markets and bond markets are down? Happy new year!
Dave Nadig
3:24
I hate to crow, but ETF pundits (you and me included!) have been saying for a decade that market pullbacks are good for the ETf industry.
3:25
What we've always said is "when markets go down, asset levels come down a bit, and things SLOW a bit, but you seem big redemptions from underperforming active mutual funds, and that money inevitably ends up in ETFs"
and thats EXACTLY what we've seen so far in the end of 2018.
if 2019 continues to be ugly, I expect flows to continue to be one way (into ETFs) and reasonably strong.
Sammy
3:25
Predictions for 2019 either in the financial world in general, or in ETFs in specific?
Dave Nadig
3:26
I suspect we're in for continued volatility, markets wise.  I just don't see much of a catalyst for stability.  THe market is VERY sensitive right now to geopolitics and macro-economics, and both seem pretty shaky (just my opinion).
3:27
So what does that mean? I'm guessing we see more focus on traditional financial planning, a lot of talk about portfolios, instead of single funds or stocks.  Which is healthy and good.
I suspect we see a bunch of bond funds launched to manage higher rates and we see the equity side continue to fill out with thematics.
And, as I said above, probably non-transparent active.
Guest
3:27
What’s the relationship between the Fed hiking yesterday and equities decreasing so much?
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