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Dave Nadig
2:59
Good afternoon!  Welcome back to ETf.com Live!
As always, you can ask questions in the box below, and I'll get to as many as I can until my fingers fall off (or about half an hour).
3:00
We'll post a transcript up a bit after here at the same URL in case you miss anything.
With that, let's get started.  (Oh, and before I even read it -- the Soundtrack for today is Paul's Boutique by the Beastie Boys)
Ron
3:00
If you had to pick one ETF for int'l equities, what would that be?
Dave Nadig
3:01
So, there are a few great Global Ex-US ETFs, mostly from Vanguard and iShares.
there are slight differences, but if I had to pick one, it would probably be IXUS -- its at around 10 basis points.  Not the very very cheapest, but very liquid and only a BP higher or so than the cheapest.
3:02
Its not a terrible way to approach your non US exposure.  THe big variable is how much emerging markets you get.
IXUS is around 12% or so.
3:03
If that seems high or low, that's when you might want to consider breaking your developed markets exposure from your EM exposure.
Rob Arnott at Research Affiliates claims that 50% of his portfolio (!!) is currently in EM.
So ... by his take, we're all probably massively underweight!
Richard Turnhill
3:03
If passive indexing basically always provides a higher return than active management, why do so many investors still rely on active?
Dave Nadig
3:04
Hi Richard -- so, the problem isn't that active managers ALWAYS underperform, it's that it's very hard if not impossible to know WHICH active managers will out perform.
the S&P Index Vs. Active report (SPIVA) would suggest that over time, fewer than half of the managers can beat the market, but there are 30-40% who do ... just not predictably and consistently.
Some folks think they can pick the manager that will beat, and that hope drives them to keep the faith.
3:05
But also, the appeal of indexing just doesn't resonate with a lot of people.  I mean, who wants to admit they're going to be completely average?
Because that's what cap weighting basically says -- it says your willing to put up with being the most boring, uninteresting investor at the cocktail party.
3:06
Meanwhile, there's some guy over by the Shrimp who is telling stories of buying Tesla at just the right time, or that lady over at the cheese dip talking about how "her manager" got her out of EM at just the right time.
(that the other 50 people at the cocktail party trailed isn't want anyone remembers).
Shrug.  But honestly, indexing is winning -- the flows definitely show that.
John K.
3:06
I recently read that Dave Nadig does not own any ETF's . Really? A chef that doesn't eat his own cooking! Whats up with that???
Dave Nadig
3:07
Hi John!  Totally legit question, with a simple (perhaps cowardly) answer.
I spend most of my time writing and talking about ETFs.  If I held ETFs, I would have to make the normal disclosure of whether I owned the ETF I was talking about every single time I spoke or wrote.
3:08
So for instance, I'd have to say (No, I don't own IXUS) in the answer above.
I decided a long time ago that I would just stick what money I have in the most boring low cost index funds I could find and forget about it.
If you care: like many people, I've ended up with accounts at several places because of different jobs and so on, so I have a combination of Vanguard, Fidelity and Schwab index funds, all extremely boring and cheap.
3:09
I haven't made a change other than a re-balance in years.
Dayna ClementBlockchainNewbie
3:09
Hello Dave. Is every exchange traded product based on indexing? So indexing first came on the scene when SPY launched?
Dave Nadig
3:09
Not quite, but close.
3:10
the first ETFs (SPY, then the WEBS products which became iShares country funds, the QQQs, etc..) were all index based.
but there are active ETFs -- some quite big ones actually.  Something like PIMCO's BOND is actively managed, for instance, as are ARK and Davis' equity funds, and so on.
3:11
So you can get some active in an ETF wrapper if you want it.
And SPY definately wasn't the first index-based product.
there were Vanguard mutual funds before SPY, and there were a lot of institutional commingled funds and separate accounts that were indexed going back into the 70s.
(arguably, the first closed end fund in the 1600s was indexed, but thats a different discussion!)
Nemo
3:12
When Bruce Bond was on the animal spirits podcast he said that they lower the upside after using the dividend to pay for the initial part of the buffer in the defined outcome etfs. How low would the upside cap need to be if they didn't sell the dividend and instead targeted the S&P total return index?
Dave Nadig
3:12
This is a puzzler -- I didn't hear Bruce on the podcast, so I don't know precisely what he said, but the innovator funds ONLY own FLEX options.  They never own stocks, so they don't "collect" any dividends that they could then "spend"
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