WEBVTT - Quick bite: Active investing vs passive ETFs—Do you need both?

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<v Speaker 1>You're listening to a shares these podcast it sounds like

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<v Speaker 1>you and the Motley Full community. You're the classic active investors.

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<v Speaker 1>You are really getting in there into the weeds. You're

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<v Speaker 1>looking closely at what each company's performing. We've seen obviously

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<v Speaker 1>a trend towards automatic diversity. Is the word I'm looking

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<v Speaker 1>for here products like ETFs. I mean, is that is

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<v Speaker 1>that reducing the risk or would you say there's some

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<v Speaker 1>sort of concentration risk building up there that people need

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<v Speaker 1>to be careful of there when there when they're buying

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<v Speaker 1>those kinds of products.

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<v Speaker 2>Now, I love passive ETFs. I'm an active investor just

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<v Speaker 2>I have a stockpicker. I don't mean active by the

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<v Speaker 2>way it's active.

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<v Speaker 3>I there's active, right.

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<v Speaker 2>I'm not an active trader. I don't buy so by

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<v Speaker 2>cell by cell. I'm active in the sense that I'm

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<v Speaker 2>trying to find companies that I think.

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<v Speaker 3>Will beat the index.

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<v Speaker 2>If I buy company X, I buy it so I

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<v Speaker 2>think at five years time it'll be worth more and

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<v Speaker 2>hopefully grow faster than the market.

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<v Speaker 3>That's my version of active. But I love passive investing.

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<v Speaker 2>You see the fund man is out there, by the way,

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<v Speaker 2>the ETFs are destroying the market.

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<v Speaker 3>Absolute rubbish, complete and other nonsense.

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<v Speaker 2>Passive ETFs are wonderful, wonderful, wonderful things. Just they are

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<v Speaker 2>right mean less business for me, so be it. Investors

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<v Speaker 2>are much better off than they were because a massive

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<v Speaker 2>range of passive ETFs are available. A couple things to

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<v Speaker 2>answer your question. Firstly, not all ETFs are the same.

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<v Speaker 2>Now your viewers know that I really, really really dislike

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<v Speaker 2>thematic ETFs, not because individually some of them can't do well,

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<v Speaker 2>but because they're sold as panaceas AI is going to

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<v Speaker 2>be huge. Here's my AIETF, and the invitation is to

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<v Speaker 2>say AI is big, therefore AA ETFs are big, therefore

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<v Speaker 2>I should buy the ATF.

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<v Speaker 3>Couldn't be further from the truth.

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<v Speaker 2>So I despise thematic ets because of the way they're sold,

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<v Speaker 2>and get out to anyone's selling ETFs out there.

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<v Speaker 3>I love the plane Vanilla index based.

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<v Speaker 2>Low cost ETFs, the Jack Bogul Vanguard style ETFs ASX

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<v Speaker 2>two hundred or three hundred s and P five hundred

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<v Speaker 2>m SCI global. Those are the great great gray ETFs

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<v Speaker 2>because they are low cost, because they track the index.

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<v Speaker 3>They're not trying to make bets.

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<v Speaker 2>They're not trying to get you to make a bet

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<v Speaker 2>on AI or robotics or lithium or bitcoin.

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<v Speaker 1>Or goal even with the concentration you're getting from Meg Siven,

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<v Speaker 1>I mean the Meg seven companies. Some of those companies

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<v Speaker 1>are bigger than entire sectors. Now you know, I'm pretty

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<v Speaker 1>sure if you edit up with the healthcare sectors or

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<v Speaker 1>the you know, some parts of the industrials, and you

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<v Speaker 1>go to the EU see kind of r.

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<v Speaker 2>So yes, absolutely, and you ask about diversification of concentrations.

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<v Speaker 2>So I'm not saying don't pick individual socks. What I'm

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<v Speaker 2>saying is ETFs are a great based re portfolio. And

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<v Speaker 2>anyone who said to.

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<v Speaker 3>Me is this enough? I say, yes absolutely. Do you

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<v Speaker 3>think do I think you do better by picking stocks? Yes? Absolutely?

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<v Speaker 3>But is that enough?

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<v Speaker 2>If you're young enough, if you had regularly to a

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<v Speaker 2>handful of diversified, indext based ETFs, you'll retire very, very

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<v Speaker 2>very comfortably and be very happy you did.

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<v Speaker 3>I have no doubt.

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<v Speaker 2>If I can't make promise, I'm not allowed to, but

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<v Speaker 2>I have no doubt you'll be very happy with what

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<v Speaker 2>you did.

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<v Speaker 3>Right, So back to your.

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<v Speaker 2>Point about concentration, I wouldn't just own a US ETF,

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<v Speaker 2>same as I wouldn't just known asx CTF because we've got.

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<v Speaker 3>Index four banks and minors.

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<v Speaker 2>But if I had a global ETF or a range

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<v Speaker 2>of etfsx three hundred, you might have a developing market.

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<v Speaker 3>You might have an emerging developed markets. If you got that.

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<v Speaker 2>Diversification by currency, by geography, by industry, then yeah, you

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<v Speaker 2>start to put together a portfoliot that it is diversified.

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<v Speaker 3>Here's the other thing. When you buy an ETF, don't

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<v Speaker 3>just put money in a ETF once and be done

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<v Speaker 3>with it.

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<v Speaker 2>If your dollar cost averaging adding regularly, maybe in hindsight

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<v Speaker 2>we say, you know what, September twenty twenty five was

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<v Speaker 2>a massive bubble.

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<v Speaker 3>But if you've been adding monthly over.

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<v Speaker 2>The last year, two years, five years, ten years, add

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<v Speaker 2>all that up. People say to me sometimes, oh, the

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<v Speaker 2>MAC hasn't recovered from the highs of twenty two thousand

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<v Speaker 2>and seven, or it's not as high as it was

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<v Speaker 2>in whatever. If you'd only bought chairs on that day,

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<v Speaker 2>maybe I'll talk to you about it.

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<v Speaker 3>But if you did, you are the unluckiest person in

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<v Speaker 3>the world.

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<v Speaker 2>If you'd have been buying every month for the three

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<v Speaker 2>years before and the three years after you are up

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<v Speaker 2>massively on that point.

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<v Speaker 3>So is it diversified.

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<v Speaker 2>Yes, If you buy one ETF for one index and

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<v Speaker 2>you buy it once, you're absolutely rolling the dice. I

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<v Speaker 2>still think you'll do very well, by the way, but

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<v Speaker 2>maybe not as well if the market was lower.

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<v Speaker 3>If you're adding regularly to a range of ETFs, and.

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<v Speaker 2>You're adding to that regularly every payday or every month

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<v Speaker 2>or every quarter over five, ten, fifteen years, I mean,

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<v Speaker 2>think about it. If you do it every month fifteen years,

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<v Speaker 2>what's that If you've made one hundred and eighty different

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<v Speaker 2>transactions over that period of time, have.

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<v Speaker 3>You bought one of those is going to be at

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<v Speaker 3>a bubble? Probably, one of those is probably going to

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<v Speaker 3>be at an absolute low.

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<v Speaker 2>Low, most somewhere in between. But overall, I'll go back

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<v Speaker 2>to the van Get index chart. I know your viewers

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<v Speaker 2>have seen it a million times. Google Vanguard indext chart.

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<v Speaker 3>If you don't know what I'm talking about.

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<v Speaker 2>Yes, you might have brought it two thousand and seven

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<v Speaker 2>at the peak, then you brought in two thousand and

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<v Speaker 2>nine at the trough. You might have brought it ninety

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<v Speaker 2>ninety nine at the peak, and then at two thousand

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<v Speaker 2>and one in the trough. You're probably bought in twenty

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<v Speaker 2>twenty March twenty twenty at the peak, and then again

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<v Speaker 2>in April twenty twenty in the trough, and where are

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<v Speaker 2>we at record highs. Sometimes you'll buy at high prices,

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<v Speaker 2>sometimes at low prices. I'd love to know which ones

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<v Speaker 2>will which side can not do it, but you can

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<v Speaker 2>only do that in hindsight.

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<v Speaker 3>And in hindsight, by the way, where at record highs

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<v Speaker 3>every point before that was worth buying SHT.

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<v Speaker 1>And visting involves the resk, you might lose the money

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<v Speaker 1>you start with.

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<v Speaker 2>We recommend talking to a licensed financial advisor.

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<v Speaker 1>We also recommend reading product disclosure documents before deciding to invest.