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Dave Nadig
2:59
Good afternoon and welcome to ETF.com Live!
3:00
AS always you can enter your questions below at any time and I'll get to as many as I can before my hard stop at 3:30PM.
So let's get started.  First: today's soundtrack is David Byrne, because I saw his show in NY last night and it rocked my world:
BufferMan
3:00
First Trust's buffer ETFs are finally available, why did it take so long to go through the SEC approval process? And, do you have any insights on them. Seems Innovator has gotten a big head start on First Trust with having S&P500, Russ2000, EAFE and EM available.
Dave Nadig
3:01
Yeah, so of course I love these products,because I'm a fan of restructuring returns in a way that is actually helpful for investors.
The two sets of funds are extremely similar, but there are some subtle differences.  Heather Bell teased some of this out in her coverage this morning:
3:02
They both use flex options: the innovator funds use them on the S&P Price index, the new FlexShares funds use Flex options on SPY itself (again, price).
I suppose, theoretically, that means you're "eating" the cost of SPY over time, but honestly, that will end up being noise.
3:03
Both are expensive enough (I believe innovator is a few bps cheaper, but they're around 80) that the difference will be pretty negligible.
FlexShares have slightly different buffer targets, and as you point out, right now, are just a few funds vs. the rather large set that Innovator has launched.
I suspect FlexShares will still do well, because they are SO good at distribution.  So, yay competition!
Will we see a price war?  A feature war?  Bring it on I say!
Todd Rosenbluth - CFRA Research
3:04
Hi Dave. You showed a great chart on ETF.com on the factor quilt on how momentum and small cap factors performed best in some prior calendar years and not others. Is your takeaway that investors in these factor ETFs better suited being patient (rather than trying to time a factor) or choosing a multi factor approach.
Dave Nadig
3:04
Hi Todd, thanks for this.  Yeah, I think that there's a real challenge in factor timing, just like there's a real challenge timing ANYTHING related to themarkets.
3:05
I have talked to quite a few advisors who "roll their own" multifactor exposure by combining minvol, momentum and quality.  I imagine if you do that and reballance and control costs, you can lower your overall portfolio risk and get pretty close to market returns (I've seen math suggesting that at least).
3:06
I do think minvol/lowvol strategies are unique in that to a certain extent, you don't NEED to time them.  THey pretty consistently do what you expect -- lower your actual realized risk over time.
The variable I think is more whether thats ALSO giving you the anomalous out-performance we see in occasional years.
3:07
So they may make sense for nervous investors, regardless of regime.  I'll be digging into this more on Tuesday on a webinar I'm doing with Alex Pire from Natixis, who's forgotten more about this topic than I'll ever learn.
(feel free to join, it's free, etc: https://www.etf.com/webinars/upcoming-live-webinars.html)
Thom
3:07
Hi Dave, Is direct indexing going to be the new “smart beta” craze?
Dave Nadig
3:08
I think that's a bit of a misnomer.
SmartBeta is really a marketing phrase/movement packaging up quant finance trends that have been real for 30 or so years.  40.
Direct Indexing isn't about WHAT you invest in at all.  It's a paradigm shift on HOW you invest -- the literal nuts and bolts.
3:09
It's enabled by technology, more than anything, and now by cost constraint and fractional trading.
So will it be a BIG DEAL? I'd argue, like quant finance, it already is.  It's just a question of how it gets packaged down more towards the RIA/Retail level of assets.
3:10
So, yes, to big, but I think DI will have legs that last for a generation.  Fundamentally, it could just relegate packaged products to the dustbin of history.  But I think I will be LONG dead when that actually happens.  It'll take time.
Think how long it's taken to really get the commission model burried -- its getting there, but it's still alive, and discount brokers have been fighting that war for 40 years too.
Byrne Fan
3:11
So did you read his book, "How Music Works"?
Dave Nadig
3:11
NO but it's on my list!
Boomer
3:11
With all kidding aside from your earlier tweet: Do you think that there really is something "different" about boomers vs. millennials in terms of investing, other than that which we'd expect from age?
Dave Nadig
3:11
It's really hard to say for sure, but the survey's I've read suggest that investors in their 20s and 30s are in fact expressing different opinions about investing than we've seen in other generations.
3:12
Specifically, there's a real, lasting desire for ESG to be a part of the process.
After decades of a lot of the industry sort of quietly snickering about ESG/SRI, I think it's really going to shift as this generation gets control of larger piles of investible assets.
3:13
That's especially the case outside the U.S., but I think it's true here too.  The study Scorpio did with Factset a few years ago was really eye openning in this regard.  Something like 60% of folks in this age group said ESG was their PRIMARY concern in investing.
Even if you don't believe them, its a very very different answer than they've gotten from any other age group, and it wasn't true, say, 20 years ago whenyou asked 30 year olds.  So it's not just a "young folks" thing.
Celia R.
3:13
Are there optimal and suboptimal ways to trade ETFs, like does it matter what time of day you do so, etc.?
Dave Nadig
3:14
Hi Celia, great question.
YES, there are good and bad ways to trade.
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