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Dave Nadig
3:17
For sure.  I would expect 6C11 (that's the ETF rule, technically) compliant funds to be able to come to market in a matter of weeks going forward, frankly.  A compliant fund should basically get pretty light scrutiny.  We wont know for sure until we're in full implementation, but that's my suspiscion.
Anonymous
3:17
Are Brexit jitters affecting only European ETFs, or US-listed ones as well?
Dave Nadig
3:18
I think Brexit feeds into a global market of uncertainty.  Between what's happening in Syria, the trade war, Brexit, uncertain fed policy, the earnings recession -- there are just a ton of nervous unknowns out there.  Markets generally don't like uncertainty.
That's why we see "relief rallies" - however short - any time it looks like any of these things is calming down.
3:19
Obviously, UK and EU specific funds will have more volatility around Brexit news and resolution than, say, EAFE funds.  But it's all part of the overall picture.
Markets are simply too interconnected in the modern world for it to be any other way.
Inez Schuyler
3:19
Seems like REITs were a real hot ticket for some time. Are they no longer a star investment?
Dave Nadig
3:20
THe attraction for REITs right now is that, historically, they outperform the broad equity markets in late-cycle.  Whether we're IN late cycle is a good question, but that's been the history.
The challenge with any call like this is of course timing.  Getting in "too early" in reits, or "too late" could blow up what might otherwise look smart.
3:21
For that reason, I think a prudent approach isn't to try and time an entry but to just consider whether you want REITS as a slice of your overall asset allocation, and then rebalance as the markets shift.
3:22
So for example, I know a lot of advisors see REITs as an alts allocation, and keep a consistent 5% or so exposure to them. Much like they would gold.  THat seems like a prudent approach to me.
Guest
3:22
How soon til the robo advisor becomes mainstream?
Dave Nadig
3:22
I'd argue it already has.  And the latest fee war (all the big brokers going commission free) is going to drive this even harder.
3:23
Consider Schwab for instance.  Since they now no longer make money from commissions, we can assume they're also going to forgo the money coming in from ETF issuers paying to be commission free.
So where do they make money?  Cash is a big part of it.  If they can pay almost nothing on cash balances, and manage their own cash book well, they can eek out a chunk of revenue, and that's always historically been true.  So that's not NEW revenue
3:24
They can provide ancillary services (I, for instance, now have my primary banking relationship with Schwab).
But mostly, they can drive investors into Schwab branded funds where they earn basis points.  That's what their robo is all about.
3:25
So I imagine your going to see a VERY strong push from all the brokerages to get folks into their robos, whether to collect direct fees for those services, or just to funnel money into house branded funds.
Sloane
3:25
What would other ETF issuers (e.g. Fidelity, Direxion, Global X) have to do to ever try to near the AUM of the big two (iShares, Vanguard)?
Dave Nadig
3:25
Complex question.  Some of this is an act of will.
3:26
Nobody is crying over Fidelity's TOTAL AUM -- they're enormous of course.  But they come from a different world.  Charging for active management.
The ishares brand was built off the opposite end of the investment world: low cost beta, all the way back to the 1980s.
So there's really just a philosphical difference.
3:27
Fidelity could become a top 5 ETF issuer quite quickly: they'd just need to convert, or close-and-redirect, their flagship mutual funds.
But that's a level of cannibalization and fee compression I can't imagine them stomaching.
3:28
As for the other folks you mention: a lot of this comes down to institutional adoption.  It's very hard to compate with decades of institutional focus.  State Street and Blackrock in particular are absolute institutional darlings.  They get multi-billion dollar mandates.
And while most of those mandates end up in SMAs, the ETFs act as a liquidity sleeve on those.  THat's a huge entrenched advantage.
3:29
So I don't see a huge usurpation coming soon, it's just too hard.  Doesn't mean folks cant compete.  It just means I don't see Trillion dollar shifts happening in the next decade.
Tony
3:29
My indexed options for US exposure in a tax-deferred account is limited to an S&P 500 index mutual fund. How important would it be to complete that out with VXF in my Roth IRA? If I use VXF, how do I determine the right ratio or amount of VXF to buy to create a total market index?
Dave Nadig
3:30
This is a GREAT question, and one I imagine a lot of investors face.
So many of us are in this position - we have limited options in one set of accounts, and unlimited options in another.  You're absolutely thinking about this in the right way.
3:31
Truly, you need ot think about your "portfolio" well outside your "account."  For instance, if you have $500,000 in a 401k, and $100,000 in a rollover IRA, and $100,000 in your bank account as your cash position, and say, a house.  You have to roll all that together to understand your exposure.
3:32
I know a lot of investors who say "Oh no, I don't have any cash in my investment portfolio" but are sitting on cash somewhere else.  That's still cash!
3:33
So if your 401k has really limited options, its absolutely the right call to think about how you balance that out.  Whether its an extended market position (like you mention, VXF) or individual funds, or using your taxable account to get your gold exposire, or whatever.  Holistic is the way to go.
This can be surprisingly hard to keep track of of course.  Many folks have accounts on different platforms and so on.  That's where a lot of advisors earn their keep: consolidating and reporting on those disparate exposures.
3:34
OK, that's going to do it for today. Sorry if I didn't get to your questions.  Next week we'll be doing this same time, same day, so come on back and we can continue things.
Have a great rest of the week, and see you all next time!
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