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Dave Nadig
3:11
If I was evaluating robos for my personal use, I would probably focus on:
1: Customer service.  It may be automated, but I still want to be able to get someone on the phone.
3:12
2: Cost.  This varies pretty widely.  Not suggesting "cheaper = always better" but I'd want to know what im paying for.
3: Investments.  While there's a lot of similarity between ETF-based robos, there are also a lot of differences.  Schwab/Vanguard lean heavily on house brands, for instance.  I'd want to kick those tires.
3:13
4: Unique bells & whistles.  Things like tax lost harvesting and direct indexing.
probably in that order for me, but maybe in a different order for you.  I can hear Todd Rosenbluth screaming "exposure" into his computer through the internet from here.
Roger F.
3:13
Are trading spreads more important than expense ratios when evaluating ETFs?
Dave Nadig
3:13
This is a great question, and entirely dependant on holding periods and how much you believe the spreads.
3:14
If your time horizon is infinite, then spreads don't matter at all, because you're making two trades: one in, one out.  And you're making those trades so far apart, that even a 1% spread fades into nothingness.
3:15
If your time horizon is today, then the expense ratio is irrelevant, becaus eyou're only paying a tiny fraction of the expense ratio.  Spreads are everything, because your going to pay both sides of that today.
3:16
Of course, most of us are in the middle.  So I'd advocate doing personal math here.  Just put the potential funds in a spreadsheet, and run a simple calc of your actual dollar cost for your holding period.
As for "believing the spread" -- with smaller ETFs (especially if you're a larger customer) you can often do substantially better than the advertised on screen spread if you work with a trading desk, or call the issuer's capital markets desk and ask for advice.
Nemo
3:16
Are you aware of any rebalancing research that covers variations in asset correlation or rebalancing of smaller portfolio allocations? Almost everything I've seen is 2-3 asset classes with any allocation rarely below 20%
Dave Nadig
3:17
Hi Nemo, there's actually surprisingly little work that's been done around this.
I did read some intersting stuff on the risk implications of fixed rebals a while ago.  One sec:
(thank god i'm a link hoarder!)
3:18
And if you hit up the research affiliates website, I believe Rob Arnott and his team have done some work around this area as well, but not at the small level where your talking.  I'd love to see that work though.  If you find something send it to me!!!
TomTom
3:18
Are smart beta and factor investing the same animal?
Dave Nadig
3:18
Given that nobody will even agree what "Smart Beta" is ... probably not.  In my personal definition, factor investing is a subset of smart beta.
3:19
But I'd also put things like sector rotation strategies, or market timing strategies into the "Smart Beta" circle of the venn diagram.
So all factor investing = smart beta, but all smart beta != factor investing.
Anonymous
3:20
What would you say to someone who has an all-ETF portfolio? That that's too narrow; they should also include, e.g., mutual funds, stocks …?
Dave Nadig
3:20
For most investors saving for retirement, future spending, college, houses and so on, you can absolutely have an ETF only portfolio.  In fact, tons and tons of advisors do just this.
3:21
Even the relatively "dumb" portfolios we often highlight here as examples are massively diversified, well run, tax efficient and incredibly cheap.
So theres nothing you'll get from mutual funds or single stocks that's really helpful.
The caveat is: if you belive in active management, or more specifically, a SPECIFIC active manager, you may need to include mutual funds as well.
3:22
Of course, you can also build a low cost, indexed mutual fund portfolio that's basically as good as an ETF portfolio.
Single stocks (or single securities of any kind) introduce large, large vectors for risk however.
3:23
Single stock blowup risk is a real issue.  Imagine you were the stereotypical older investor leaning on your utilities stocks for dividend checks, and you had a giant position in PG&E?
Even the safest "safety" stocks have blowup risk.  Diversification is a superpower.
TokeN
3:23
Seriously, AdvisorShares wants its potential marijuana ETF to be called “YOLO”?
Dave Nadig
3:24
First, two points for the name.  And yeah, I kind of snickered at that too.  But is it really much less funny than "MJ" or, "PBJ" ...
3:25
But really, I just see it as a way to get an extra headline or two.  Proof is always, always in the pudding.
3:26
So I would give them a bit of a pass for having fun with the ticker.  I mean, the pet-care ETF is called PAWZ for pete's sake.  And it's a perfectly solid investment thesis and portfolio if you're a buyer in the theme.
Jenna Robideaux
3:26
Will direct indexing make ETFs obsolete? If this is the trajectory, how soon do you think it will happen?
Dave Nadig
3:26
Hi Jenna -- I'll be talking a bit about this in Florida, and wrote a bit about it earlier this week.
3:27
But to recap: I think we're headed for a mass-customization world, which implies a new business model built on direct indexing (or whatever we end up calling it).
But just like I don't think Mutual Funds go away, I don't think ETFs go away either.
MFs have a solid use case (non-transparent strategies, fractional shares for DC plans).
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