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Dave Nadig
2:59
Good afternoon folks, and welcome to ETF.com Live!
As usual, you can type your questions in the box below, and I'll cram as many as I can in the next half hour.
3:00
One quick shameless plug: we're hosting an ETF 101 webinar next week.  Just us, no sponsors or anything, and the idea is for it to be a real open forum where we can dive deep.
3:01
I'll do some 101 presenting in the first bit, and then its all open Q&A.  You can register here if your interested: https://www.etf.com/webinars/upcoming-live-webinars.html
OK, lets get to the questions.
Janet
3:01
Soundtrack?
Dave Nadig
3:01
Sleater-Kinney.  It's been a punky week or so: https://open.spotify.com/artist/4wLIbcoqmqI4WZHDiBxeCB
Jackson Broward
3:01
Volatility is a big issue right now in the market. Are there any ETFs specifically for that?
Dave Nadig
3:01
Hi Jackson - lots of options here.
3:02
If you are trying to bet on volatility spiking (as in, a short term, few day kind of event) then there are a bunch of ETFs that directly track VIX futures.  The big one there is VXX.
3:03
The caveat is that it can degrade a lot over time due to the contango in the vix futures market, so you should think about it (and the many funds similar to it) as trading vehicles, not investments.
If you are, on the other hand, looking to invest in equities but are worried about volatility, theres a whole raft of products designed to minimize your exposure to that volatility.
3:04
USMV and SPLV are the two biggest in the area,
But here's the big list: https://www.etf.com/channels/low-volatility-etfs
They generally do what they say on the tin, but there are a lot of differences between them - you can go large cap, small cap, US, international, etc. etc...
Stef
3:04
With all the unforeseen areas that FANGs have gotten into, is there any industry they won’t step in to? Insurance …?
Dave Nadig
3:05
Insurance is a good call.  I DO think we see them get into financial services though.
Probably banking is a first step, but they're natural distribution platforms for things like Robo-advice services.
And eventually, I think someone in the group steps up with a low cost direct indexing service.
Larry
3:05
I don't understand tracking error... why does it matter?... at the end of the day we want returns in our investments... if my ETF is up 10% or down 10% how does that matter
Dave Nadig
3:06
So, "Tracking Error" is an academic measurement of the standard deviation of daily returns between a benchmark and a portfolio.  So between, say, SPY and the S&P 500.
For most ETFs, its irrelevant.  Much more important is "Tracking Difference"
TD is a measurement of how a fund does compared to the thing its promising over rolling 1-year holding periods.
3:07
Your nominal expectation is that a perfect index fund trails its index by exactly its expense ratio.
But reality is messy.  Funds optimize, they lend securities, and so on.  They have to manage reballances and so on.
So TD gives you a better barometer of your true cost, often, than just the expense ratio.
And it can be dramatic.
3:08
Its basically a way of deconstructing your performance.
Beyonce
3:08
I just listened to the "Trillions" episode celebrating the QQQs. I seem to recall you once called it "the worst" ... what did they miss?
Dave Nadig
3:08
Was excited to see this question!  So great podcast.  One sec for the link:
3:09
They point out that the QQQs aren't really a tech fund and all that, and its a good listen, but they missed a few key issues:
1: QQQ is ONLY NASDAQ listed non-financial companies.  Not the top 100 non-financial stocks in the U.S.   That would be a radically different portfolio.
3:10
2: It's actually a deathpool.  The fund "expires" on the death of a list of named people.  That can (and will) get adjusted over time, but its a fun weird piece of trivia.  Theres no real danger or anything
3: It is not cap weighted (even though they say it is a dozen times).  It follows one of the most arcane methodologies in modern investing, which takes "overweight" stocks that pass a cap and then reassigns that weight to the smallest stocks, in a weird, iterative fashion.
3:11
It's truly bizarre.
But everyone should go listen to Trillions regardless, tis a great podcast.
Robin H.
3:11
It seems MJ is doing well, and I guess YOLO too. Therefore, are most issuers keen on developing cannabis ETF funds?
Dave Nadig
3:12
I think there's maybe room for another one or two, but I actually don't expect major issuers to wade in here at all.  The regulatory issues (while largely solved by Yolo) are non-zero.  And there's blowup risk should there be a big shift in the legal status nationally.
So I like having a little competition, and I suspect we'll end up with 3-4 survivors, sort of like we have in other niches.
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