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Dave Nadig
2:00
Good afternoon, and welcome to ETF.com Live!
As always, you can ask questions in the window at the bottom, and I'll get to as many as I can in the next 30 minutes
Let's roll ...
Alice
2:00
Soundtrack?
Dave Nadig
2:01
In honor of Mayor Pete, I'm listening to his favorite album: Hail to the Thief by Radiohead:
Rookie
2:01
I realize you can't to all questions, but if you could address my question from last week about difference between ETFs & direct indexing?  Thank you
Rachel Weissmann
2:01
Good morning Dave. What exactly is “direct” indexing? How does it differ from the indexes that ETFs are based on?
Dave Nadig
2:01
Double whammy here, I guess folks are interested!
So, in direct indexing, instead of buying a mutual fund or ETF which then in turn owns, say, the 500 stocks in the S&P 500 ...
2:02
... you instead simply have your broker buy all the stocks individually.  If that sounds like a nightmare, it doesn't have to be.
Firms like Parametric and Optimal will do this for you, and even let you own fractional shares.  Theoretically you could follow any index this way.
So why would you bother, when you can get an ETF for under 10bps?  Customization, primarily.
2:03
Direct ownership lets you do things like tax lost harvesting at the single security level (selling Merck because you can book the loss, and replace it with some Pfizer, for instance).
It also lets you tweak if you have specific needs.  Lets say you work at Apple, maybe you'd like the S&P500 - AAPL
Or you want to avoid fossil fuel companies.  Easy to do with a direct index approach.
2:04
Software makes all this pretty trivial, and you'll see more firms offering versions of this (Wealthfront does now) to lower and lower account sizes.
Right now, you generally need 100K or more to play.
and generally, only equities.
But that will all change.
Etienne
2:04
What’s a “bump zone”?
Dave Nadig
2:05
So, I'm guessing what you're referring to is the cap gains bump zone.
Usually what peopl emean by this is when you end up with cap gains that push you up a tax bracket.
2:06
In the worst case, you can end up with some pretty complex situations.  I think Michael Kitces wrote a piece on this ... one sec.
Thats a great piece that gets deep in the weeds on this.
T. Turnblad
2:07
Who are some investing/finance “gurus” you respect or follow (past and present)?
Dave Nadig
2:07
Good question!  So, my answers are mostly pretty boring.
2:08
Ben Graham (The intelligent investor) Burton Malkiel (Random Walk), John Bogle, etc...
Outside the mainstream, I'm a pretty obvious fan of the work that Ritholtz Wealth Management does every day demystifying the markets.
The whole crew there: Barry, Josh, Ben, etc...
Pink Pony
2:09
How does ETF lending work per the Bank of Japan announcement?
Dave Nadig
2:09
So, the headline was that BoJ, which owns a TON of the Japanese equity market, would start making it's shares available to borrow.
2:10
I think they haven't really clarified what that means, functionally, but I assume it means they would loan shares out just like you loan shares out in the U.S. -- so that shortsellers have a locate in order to short.
This ads some liquidity to the market and is incredibly common in most markets.
Most lending happens at the single stock level, but hot sectors (Cannabis, etc.) often have strong short demand as well, as people try and "call the top" in trends.
2:11
I don't think this will have any huge impact here though.
Avery
2:11
Some investors are concerned with the ETF structure during times of extreme market stress (especially for newly launched ETFs with lower asset levels). What comfort can you offer as it relates to price vs value variations during massive sell-off periods. Thank you.
Dave Nadig
2:11
So, this is a pretty common hand-wringing bit of Fear/Uncertainty/Denialism from anti-ETF folks.
2:12
The reality is we've been through some incredible market stresses where ETFs have performed perfectly.  The last time we had a hiccup was really 2010, and that prompted some small changes in how stocks and etfs are halted and reopenned.
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