You are viewing the chat in desktop mode. Click here to switch to mobile view.
X
ETF.com Live Chat!
powered byJotCast
View Full Chat Next Page
Dave Nadig
2:59
Howdy folks!  Welcome to ETF.com Live!
3:00
If you're new here: you can enter in questions in the box below, and I'll get to as many as I can in the next 30 minutes or so.
We post a transcript up ad the end of the day, so if you miss an answer, you can come back to this same URL later.
With that, let's get down to it!
Bob Loblaw
3:00
Music???
Dave Nadig
3:01
Hillarious.  Today is a Courtney Barnett curated playlist: https://open.spotify.com/user/courtneybarnettmusic/playlist/1ytdcjV4Ls...
Todd Rosenbluth-CFRA
3:01
Hi Dave. With Vanguard’s latest ETF fee cuts, do you think investors should shift from an iShares or Schwab fund for a few basis points of savings?
Dave Nadig
3:01
Welcome back Todd!  So, we're deep in fee wars at this point.  And the short answer is probably not.
3:02
I suppose if you were in a non-taxable account, and you had two precisely identical ETFs (for instance, VOO from Vanguard, and IVV from iShares), and you had no commissions to worry about ... then yes, a few basis points could be worth it over the long term.
but you'll likely lose a basis point (.01%) or so just in the slippage.
3:03
By that I mean: you have to pay just a bit more to buy than you get when you sell.
Even if that's just a penny or two.
Also, there are timing issues.  If you're sitting on buying power in your account, you could do a simultaneous trade, but otherwise, you'll have to wait for the sell to settle before making the buy ,... and you could lose a lot more than a few basis points being out of the market.
3:04
So in general: it should take more than 1-5 bps to make you trade.
just my thoughts there.
C. Talley
3:04
Did factor investing experience bad performance in 2018 because it's been overhyped?
Dave Nadig
3:04
So, "Factor Investing" didn't experience bad performance in 2018.  Not really
You can find this in any number of places (blackrock does a quarterly survey on it)
3:05
but the 2018 numbers are roughly down 4.5% for the broad us equity market,
now SOME factors, like value, did quite badly.  Value was down something like 11% LAST YEAR.
But many min-vol strategies ended up on the year by a few percent.
3:06
and momentum in general still outperformed the broad market.
So it's always down to "which factor" when we talk about factors.
As for whether its overhyped?  Sure, we got a lot of Smart Beta talk for the past few years, but this has been the institutional approach for decades... So I don't think its some sort of fad.
its evolution.
related:
Taryn Fulmer
3:07
Many say smart beta has run its course. Yet last year those ETFs took in $80 billion, its biggest year ever. So isn’t it still front and center?
Dave Nadig
3:07
Yep:  Reports of The Death of Smart Beta has been greatly exaggerated.
3:08
At the conference a few weeks ago, basically nobody was pitching low cost beta.  Y'all may still be BUYING it, but the ETF-industrial complex is still pushing an ABMC agenda (anything but market cap).
Some of that focus has turned towards ESG, and some of it has turned towards Active (witness Vanguard's active "smart beta" offerigns).
But it's very much still alive, and I expect it to be more so this year.
Jim
3:08
Regarding ETFs, would you explain exactly what a “spread” is?
Dave Nadig
3:09
So picking up on the topic Todd brought up.  Anytime your buying and selling anything, from used cars to real estate to ETFs, you expect to pay a bit more than you get when you sell something.  That gap is the spread.
So you can think of any "round trip" as costing you the spread amount in execution costs, all else equal.
3:10
So if you buy a fund for 100, you might only be able to sell it for 99 - a 1% spread.
You should take that cost into consideration when picking any investment: a stock, an ETF, an individual bond, etc.
3:11
In traditional mutual funds, since you actually don't Buy and Sell (you create and destroy shares), you're not paying that spread, because you transact at the net asset value at the end of the day.
(the trade off of course is, you have no idea what price your getting until after the fact).
OK, more thoughts here on fee wars:
j. Gross
3:11
Hello Dave, Vanguard recently updated their website (today) with the most recent annual reports for many of their biggest funds/etfs and they show big reductions in expense ratios for the etf share classes. The S&P 500 and the Total Stock Market ETF will have their expense ratios cut in half from 4 to 2 bps for example. Do you expect another round of fee cuts from the other providers (iShares, Schwab) because of this?  Some of the iShares core funds are starting to look expensive by comparison for example.
Connecting…