1
00:00:05,880 --> 00:00:09,000
Speaker 1: Welcome to Trillians. My name is Droll and I'm Eric Beltis.

2
00:00:09,440 --> 00:00:12,639
Speaker 1: Last episode we talked about how ETFs have become such

3
00:00:12,680 --> 00:00:15,840
Speaker 1: a big deal. This time we're going to try and

4
00:00:15,960 --> 00:00:19,560
Speaker 1: make sense of the chaos that they've created. Because there's

5
00:00:19,640 --> 00:00:23,119
Speaker 1: t these things. Some of them might blow up and

6
00:00:23,200 --> 00:00:26,160
Speaker 1: make me rich, others might blow up and make me poor.

7
00:00:26,880 --> 00:00:30,760
Speaker 1: One a Day launches in the US. Eric, how am

8
00:00:30,800 --> 00:00:34,479
Speaker 1: I supposed to make sense of all that chaos? I

9
00:00:34,560 --> 00:00:38,600
Speaker 1: don't know. No, I do know. I see you next week. Look,

10
00:00:38,640 --> 00:00:41,159
Speaker 1: it's it's not easy. There's twenty Like you said, there's well,

11
00:00:41,159 --> 00:00:43,320
Speaker 1: there's two thousand eighty seven. But he was counting. Who's

12
00:00:43,320 --> 00:00:45,639
Speaker 1: got some good fact? Jack? Thank you? And my job

13
00:00:45,720 --> 00:00:49,480
Speaker 1: at Bloomberg for half a decade was to make order

14
00:00:49,560 --> 00:00:52,640
Speaker 1: out of this chaos. I looked at myself in data

15
00:00:53,080 --> 00:00:55,240
Speaker 1: when I worked there before I got to research as

16
00:00:55,360 --> 00:00:58,960
Speaker 1: the guy running a Walmart, and instead of stuff, it

17
00:00:59,080 --> 00:01:01,000
Speaker 1: was E t F s, and I had to organize

18
00:01:01,040 --> 00:01:03,960
Speaker 1: them in like a taxonomy so that when you walked

19
00:01:04,000 --> 00:01:07,319
Speaker 1: into my proverbial et F store, you know exactly where

20
00:01:07,360 --> 00:01:08,680
Speaker 1: to go and could find the E T F that

21
00:01:08,720 --> 00:01:12,520
Speaker 1: you wanted and evaluate it within say ten to twenty seconds,

22
00:01:13,319 --> 00:01:15,080
Speaker 1: and so I'll share it a little bit about what

23
00:01:15,160 --> 00:01:17,440
Speaker 1: I did, but ultimately, you know, there are a lot

24
00:01:17,480 --> 00:01:19,360
Speaker 1: of E t F s. Let's bring in one of

25
00:01:19,400 --> 00:01:22,680
Speaker 1: the questions our listeners asked on Twitter because it was

26
00:01:23,000 --> 00:01:25,600
Speaker 1: literally about one of the topics that we're gonna get

27
00:01:25,600 --> 00:01:27,800
Speaker 1: to today. Yeah. So, and by the way, please tweet

28
00:01:27,840 --> 00:01:30,800
Speaker 1: it at at Eric Beltnis or at Joel Webber Show

29
00:01:31,000 --> 00:01:33,440
Speaker 1: if you have any questions. Will definitely pick some. This

30
00:01:33,600 --> 00:01:36,120
Speaker 1: one was from Ken Natal, who's a financial planner in

31
00:01:36,200 --> 00:01:38,959
Speaker 1: New York. He says, can you discuss the various structures

32
00:01:39,000 --> 00:01:41,120
Speaker 1: and E t F s? And he says, for example,

33
00:01:41,319 --> 00:01:44,160
Speaker 1: s P Y versus V O O versus IVV, which

34
00:01:44,200 --> 00:01:48,920
Speaker 1: are all really basic plane vanilla s t F H.

35
00:01:48,920 --> 00:01:50,760
Speaker 1: We actually touched on these in the first one, but

36
00:01:51,480 --> 00:01:54,560
Speaker 1: even those three that check the same index and they

37
00:01:54,640 --> 00:01:58,080
Speaker 1: do have small differences. We'll get to it later in

38
00:01:58,120 --> 00:02:00,080
Speaker 1: the show when we get to the equity aisle, so

39
00:02:00,200 --> 00:02:02,560
Speaker 1: to speak, but that I think is indicative of the

40
00:02:02,600 --> 00:02:05,280
Speaker 1: fact that there are a lot of small differences even

41
00:02:05,320 --> 00:02:08,639
Speaker 1: when you are in the same species. So this episode,

42
00:02:09,360 --> 00:02:12,840
Speaker 1: meet the E t F s. Okay, So I just

43
00:02:12,919 --> 00:02:16,040
Speaker 1: walked in to Eric's E t F store which looks

44
00:02:16,040 --> 00:02:18,799
Speaker 1: a little bit like a Walmart. And I've got my

45
00:02:19,200 --> 00:02:21,960
Speaker 1: grocery cart here and it's got a squeaky wheel. Can

46
00:02:22,000 --> 00:02:24,919
Speaker 1: you help fix that? No, I work at Walmart. Okay,

47
00:02:25,000 --> 00:02:27,320
Speaker 1: well maybe you can help me make sense at this store.

48
00:02:27,600 --> 00:02:30,680
Speaker 1: What's your biggest department? Sure? So, if you think about

49
00:02:30,720 --> 00:02:33,519
Speaker 1: a department in terms of organizing E t F s,

50
00:02:33,600 --> 00:02:35,800
Speaker 1: we would say that mapping would be an asset class.

51
00:02:36,240 --> 00:02:38,440
Speaker 1: So when you think of departments in this E t

52
00:02:38,600 --> 00:02:41,200
Speaker 1: F store, think of them divided by asset classes. The

53
00:02:41,240 --> 00:02:43,720
Speaker 1: biggest asset class, by far as equities. In terms of

54
00:02:43,800 --> 00:02:47,200
Speaker 1: e t F S, about of the volume and assets

55
00:02:47,240 --> 00:02:49,320
Speaker 1: are an equity TF so these are ones that hold stocks,

56
00:02:50,000 --> 00:02:52,240
Speaker 1: and when you go to that section, there's different aisles

57
00:02:52,280 --> 00:02:54,799
Speaker 1: for different types of equity t s. So when I

58
00:02:54,960 --> 00:02:59,120
Speaker 1: think about how that responds for me, I think about

59
00:02:59,360 --> 00:03:02,040
Speaker 1: walking in to a grocery store when I was a kid,

60
00:03:02,840 --> 00:03:06,600
Speaker 1: and the cereal isle was a daunting place because my

61
00:03:06,760 --> 00:03:09,240
Speaker 1: mom wanna only let me have sugar cereal one day

62
00:03:09,240 --> 00:03:11,200
Speaker 1: a week, which was Saturday, and that was when I

63
00:03:11,280 --> 00:03:14,760
Speaker 1: watched Saturday morning cartoons. Poor guy, Poor Guy. So I

64
00:03:14,800 --> 00:03:17,600
Speaker 1: basically got to pick the one sugar cereal that I'd

65
00:03:17,639 --> 00:03:20,280
Speaker 1: have for that weekend, and it was like Lucky Charms,

66
00:03:20,480 --> 00:03:23,880
Speaker 1: Cocoa Puff, Captain Crunch, and they're all, so that was

67
00:03:23,960 --> 00:03:27,880
Speaker 1: your Monday through Friday days a week. So they're all

68
00:03:28,000 --> 00:03:30,959
Speaker 1: yelling at me for my attention. And that's sort of

69
00:03:31,040 --> 00:03:33,680
Speaker 1: how I feel about the equity aisle. Can you let

70
00:03:33,720 --> 00:03:36,600
Speaker 1: me make sense of the et F? Iile like it's

71
00:03:36,640 --> 00:03:39,720
Speaker 1: a cereal aisle? Sure, I mean, And it's a good

72
00:03:39,760 --> 00:03:42,360
Speaker 1: metaphor because some of the e t F is a

73
00:03:42,400 --> 00:03:45,640
Speaker 1: little healthier for you than others. I think a basic

74
00:03:45,760 --> 00:03:48,960
Speaker 1: way to divide equities is by market cap. So there

75
00:03:49,040 --> 00:03:51,520
Speaker 1: could be like a large cap aisle, a mid cap bile,

76
00:03:51,560 --> 00:03:54,040
Speaker 1: and a small cap bile, and within there there's different sections.

77
00:03:54,120 --> 00:03:57,960
Speaker 1: But take large cap but that's probably I mean five

78
00:03:58,080 --> 00:04:00,880
Speaker 1: six seven billion dollars somewhere in the ballpark. So I'd

79
00:04:00,920 --> 00:04:02,720
Speaker 1: say a quarter of all assets are going to be

80
00:04:02,760 --> 00:04:04,520
Speaker 1: a large cups. So maybe there's two aisles, but you

81
00:04:04,640 --> 00:04:07,520
Speaker 1: get the idea. So large caps are going to hold

82
00:04:07,600 --> 00:04:10,000
Speaker 1: names like Apple and Google and and those are very

83
00:04:10,080 --> 00:04:12,800
Speaker 1: popular have a lot of assets, but again there's differences

84
00:04:12,840 --> 00:04:16,120
Speaker 1: between each of the products. And again the biggest large

85
00:04:16,200 --> 00:04:19,000
Speaker 1: caps are ones that we've talked about before and that

86
00:04:19,080 --> 00:04:21,800
Speaker 1: we had a question about, which are sp These are

87
00:04:21,880 --> 00:04:25,719
Speaker 1: perfect example for why you need to Basically we say

88
00:04:25,720 --> 00:04:27,800
Speaker 1: in the industry, open the hood, or in this case,

89
00:04:28,040 --> 00:04:30,440
Speaker 1: look on the back of the cereal box. You know,

90
00:04:30,560 --> 00:04:33,479
Speaker 1: forget about the cartoon character that's like, you know, jazz

91
00:04:33,520 --> 00:04:35,839
Speaker 1: handsing on the front. Yeah, that's like making you lose

92
00:04:35,880 --> 00:04:37,960
Speaker 1: your mind. You turn the box over and you look

93
00:04:37,960 --> 00:04:40,360
Speaker 1: at the ingredients, right, and this is sort of like

94
00:04:40,440 --> 00:04:43,240
Speaker 1: looking at Okay, what are the holdings. So when you

95
00:04:43,320 --> 00:04:45,680
Speaker 1: take the SMP five hundred, you're gonna see Apple X on.

96
00:04:45,720 --> 00:04:47,680
Speaker 1: It's gonna make you feel very safe because you're gonna

97
00:04:47,680 --> 00:04:52,400
Speaker 1: recognize all the companies because in the smptfs and most

98
00:04:52,440 --> 00:04:56,080
Speaker 1: ETFs in general, they market cap wait the stocks, so

99
00:04:56,200 --> 00:04:59,480
Speaker 1: the bigger ones get the biggest waiting, and so ultimately

100
00:04:59,640 --> 00:05:02,400
Speaker 1: when you look over at smp F t F, you're

101
00:05:02,400 --> 00:05:05,400
Speaker 1: gonna see those companies. Now, the difference in the question

102
00:05:05,560 --> 00:05:08,880
Speaker 1: that was asked is that s p Y is the

103
00:05:08,960 --> 00:05:11,599
Speaker 1: biggest oldest e t F. Right, It's got two hundred

104
00:05:11,600 --> 00:05:14,080
Speaker 1: and fifty billion dollars. It's a giant I called the

105
00:05:14,160 --> 00:05:16,240
Speaker 1: King of ETFs. You could argue it's the king of

106
00:05:16,279 --> 00:05:18,600
Speaker 1: equities because it trades four times more than Apple, the

107
00:05:18,600 --> 00:05:22,120
Speaker 1: second most trade equity anyway. S p Y is structured

108
00:05:22,120 --> 00:05:23,800
Speaker 1: as a unit investment trust. That was how the first

109
00:05:23,880 --> 00:05:26,200
Speaker 1: couple of e ts were designed the mid nineties, and

110
00:05:26,320 --> 00:05:28,440
Speaker 1: the other ones I VV which is I shares, and

111
00:05:28,560 --> 00:05:30,880
Speaker 1: VOO which is Vanguard are structured is open end companies.

112
00:05:30,920 --> 00:05:33,120
Speaker 1: Now for you out there, if you haven't fallen asleep already,

113
00:05:33,440 --> 00:05:35,360
Speaker 1: we're not going to spend much time in these structures,

114
00:05:35,440 --> 00:05:38,839
Speaker 1: but it does make a difference in small ways. Unit

115
00:05:38,839 --> 00:05:41,320
Speaker 1: investment trust s p Y can't invest the dividends back

116
00:05:41,360 --> 00:05:43,960
Speaker 1: into the fund every day, and it can't do securities, Lenny,

117
00:05:44,000 --> 00:05:46,800
Speaker 1: there's there's small little things on the margins. It's not

118
00:05:46,880 --> 00:05:48,800
Speaker 1: a big deal. What I was gonna say about this.

119
00:05:49,480 --> 00:05:54,480
Speaker 1: It reminds me of vanilla. There are different types of vanilla.

120
00:05:54,720 --> 00:05:57,920
Speaker 1: There's vanilla being there's fringe vanilla, and that's sort of

121
00:05:57,960 --> 00:06:01,120
Speaker 1: what these are. Yeah, exactly. And if you pick SPY

122
00:06:01,320 --> 00:06:03,320
Speaker 1: I V V your VO and you held a ten years,

123
00:06:03,400 --> 00:06:05,560
Speaker 1: it doesn't make a difference really. I mean, you're going

124
00:06:05,600 --> 00:06:08,360
Speaker 1: to get the SMPF having to return minus a couple

125
00:06:08,400 --> 00:06:13,800
Speaker 1: of basis points. So large cap we're talking cheerios, grape nuts,

126
00:06:14,360 --> 00:06:18,600
Speaker 1: raisin brand a little bit, maybe good one. Let's talk

127
00:06:18,600 --> 00:06:21,840
Speaker 1: about MidCap, sure, mid caps a little little you know.

128
00:06:21,880 --> 00:06:24,200
Speaker 1: I always refer to mid cap as the Jan Brady

129
00:06:24,880 --> 00:06:28,480
Speaker 1: of market cap. Well, it's overlooked all the time. It's

130
00:06:28,520 --> 00:06:31,520
Speaker 1: the middle child. Large caps are the biggest, and small

131
00:06:31,600 --> 00:06:33,560
Speaker 1: caps are like you know, they're a little more volatile,

132
00:06:33,600 --> 00:06:35,400
Speaker 1: they're more fun, you can make or lose more money.

133
00:06:35,720 --> 00:06:37,520
Speaker 1: Midcaps are kind of stuck in the middle, and you

134
00:06:37,560 --> 00:06:39,320
Speaker 1: know there you don't hear a lot about They have

135
00:06:39,320 --> 00:06:41,240
Speaker 1: a hundred billion dollars. That's a pretty big section. They

136
00:06:41,279 --> 00:06:43,760
Speaker 1: could be their own aisle for sure. And mid caps

137
00:06:43,760 --> 00:06:45,719
Speaker 1: will be companies that I would say, if you opened

138
00:06:45,800 --> 00:06:47,680
Speaker 1: up a mid cap etf and you looked or you

139
00:06:47,680 --> 00:06:49,080
Speaker 1: want to turn with the box over and looked at

140
00:06:49,120 --> 00:06:51,599
Speaker 1: what's in it, you probably would only recognize a couple

141
00:06:51,600 --> 00:06:54,000
Speaker 1: of companies, like something like Urban Outfitters. I believe is

142
00:06:54,000 --> 00:06:56,039
Speaker 1: a mid cap. I shopped there, But some of these

143
00:06:56,080 --> 00:06:58,160
Speaker 1: other companies that are in the energy business and industrials.

144
00:06:58,200 --> 00:07:02,080
Speaker 1: You are so an an outfitter shopper says it all.

145
00:07:02,400 --> 00:07:04,680
Speaker 1: I love that about you. Yeah, the ironic T shirts.

146
00:07:04,720 --> 00:07:07,080
Speaker 1: At least the Urban Afters has those ironic T shirts

147
00:07:07,360 --> 00:07:11,840
Speaker 1: before they make it a target two years before. So

148
00:07:11,960 --> 00:07:14,680
Speaker 1: small cap this is like the spicy stuff. Okay, you know,

149
00:07:14,800 --> 00:07:17,200
Speaker 1: this is like the stuff you had on Saturday. Maybe

150
00:07:17,240 --> 00:07:19,600
Speaker 1: not that bad, but definitely raise raisin brand, a little

151
00:07:19,600 --> 00:07:22,600
Speaker 1: sugar on it. Whatever. Right, small caps, there's actually more

152
00:07:22,600 --> 00:07:24,920
Speaker 1: of them. So like a typical small cap ETF like

153
00:07:25,000 --> 00:07:27,880
Speaker 1: i WM or VV, those are the tickers for two

154
00:07:27,880 --> 00:07:31,280
Speaker 1: big small cap ETFs. They're gonna have two thousand plus

155
00:07:31,440 --> 00:07:34,880
Speaker 1: or stocks and they might even dip into what's called

156
00:07:36,400 --> 00:07:39,520
Speaker 1: Yeah that's good though, because remember we talked about diversification.

157
00:07:39,960 --> 00:07:43,520
Speaker 1: You definitely want to be diversified there if you pick

158
00:07:43,600 --> 00:07:47,440
Speaker 1: the right small cap small caps are ultimately like investing

159
00:07:47,480 --> 00:07:51,080
Speaker 1: in like Toddler's, you know what I mean? They you know,

160
00:07:51,240 --> 00:07:54,600
Speaker 1: they haven't really like they're not mature. I know about Toddler's.

161
00:07:54,800 --> 00:07:57,880
Speaker 1: Oh yeah, I know, me too. That's why my voices scratchy.

162
00:07:58,000 --> 00:07:59,440
Speaker 1: My two year old God knows what he's bringing home

163
00:07:59,480 --> 00:08:02,320
Speaker 1: from daycare. You know, as long as we're hanging out

164
00:08:02,360 --> 00:08:05,560
Speaker 1: in this serial aisle. Remember those little combo packs that

165
00:08:05,680 --> 00:08:09,120
Speaker 1: you could get like eight different types of cereal like

166
00:08:09,200 --> 00:08:12,080
Speaker 1: apple jacks and everything in one, and they'll always be

167
00:08:12,120 --> 00:08:16,160
Speaker 1: like one leftover. Yeah that nobody ever wanted geaties usually, Yeah,

168
00:08:16,200 --> 00:08:19,160
Speaker 1: it was all the fun ones. And then that's like

169
00:08:19,200 --> 00:08:21,400
Speaker 1: the freed to lays of the cereal pack. What is

170
00:08:21,560 --> 00:08:25,560
Speaker 1: that combo pack in your world? Great metaphor if what

171
00:08:25,880 --> 00:08:27,760
Speaker 1: we just said about going through different aisles and picking

172
00:08:27,840 --> 00:08:30,520
Speaker 1: large caps, what a lot of people do is say

173
00:08:30,520 --> 00:08:31,960
Speaker 1: the hell with it. I just want the whole thing

174
00:08:32,000 --> 00:08:34,720
Speaker 1: in one shot. And that's called broad market ETFs. They're

175
00:08:34,840 --> 00:08:37,400
Speaker 1: very popular. So here's where you get the best bang

176
00:08:37,480 --> 00:08:39,240
Speaker 1: for your buck in my opinion, because you're gonna get

177
00:08:39,240 --> 00:08:41,400
Speaker 1: the whole stock market. We're talking about four thousand stocks

178
00:08:41,520 --> 00:08:45,160
Speaker 1: roughly for point oh four percent or point oh five percent.

179
00:08:45,800 --> 00:08:48,560
Speaker 1: So if we talk about that ten thousand dollars proverbly

180
00:08:48,640 --> 00:08:51,400
Speaker 1: that you put into an ETF, here, you're gonna get

181
00:08:51,679 --> 00:08:55,599
Speaker 1: one thousand stocks per dollar per year, and that is

182
00:08:55,920 --> 00:08:58,160
Speaker 1: that's almost free basically. I mean that talk about the

183
00:08:58,240 --> 00:09:01,600
Speaker 1: pizza slice that I could that's even cheaper than pizza

184
00:09:02,040 --> 00:09:04,520
Speaker 1: in like Kansas, let alone penn Station. And then you're

185
00:09:04,559 --> 00:09:09,079
Speaker 1: invested across all equities, right, not just large cap, mid cap,

186
00:09:09,120 --> 00:09:12,760
Speaker 1: small cap. But again back to the whole diversification paradox.

187
00:09:13,240 --> 00:09:17,040
Speaker 1: If you do that, you're so diversified, you're certainly not

188
00:09:17,120 --> 00:09:20,040
Speaker 1: going to hit the lottery. You're just gonna slowly move

189
00:09:20,160 --> 00:09:22,800
Speaker 1: with the whole market. And again, some people like to

190
00:09:23,000 --> 00:09:25,680
Speaker 1: the juice of picking an individual name, but for most

191
00:09:25,720 --> 00:09:29,040
Speaker 1: people that is really a good a good deal, a

192
00:09:29,080 --> 00:09:32,760
Speaker 1: good method. So broad market ETFs are hugely popular. They

193
00:09:32,760 --> 00:09:34,679
Speaker 1: don't make the press a lot because they're so boring,

194
00:09:35,440 --> 00:09:43,280
Speaker 1: but they're they're very popular. Eric, that's my my cart.

195
00:09:43,920 --> 00:09:46,240
Speaker 1: I'm ready to go check out the next biggest section

196
00:09:46,440 --> 00:09:49,160
Speaker 1: of your store, which is which is what Yeah, good

197
00:09:49,200 --> 00:09:52,320
Speaker 1: because I thought you were sick or something. Anyway, Um,

198
00:09:52,400 --> 00:09:55,800
Speaker 1: the next biggest section easily fixed income, which is bonds. Right,

199
00:09:55,880 --> 00:09:59,480
Speaker 1: so bonds can be boring, do not fall asleep, you know.

200
00:09:59,600 --> 00:10:01,320
Speaker 1: The way I try to explain bonds of people are

201
00:10:01,320 --> 00:10:04,199
Speaker 1: exciting them about them is that fixed income is really

202
00:10:04,880 --> 00:10:08,600
Speaker 1: like like a three dimensional game. It's like chess, whereas

203
00:10:08,600 --> 00:10:12,160
Speaker 1: equities are like checkers because bonds have a maturity date,

204
00:10:12,200 --> 00:10:15,240
Speaker 1: so there's an extra time element in valuing them and stuff.

205
00:10:15,520 --> 00:10:17,079
Speaker 1: But the good news about e t F s is

206
00:10:17,160 --> 00:10:20,440
Speaker 1: you don't really need to worry about a ton of that. Ultimately,

207
00:10:20,840 --> 00:10:23,280
Speaker 1: in the fixed income section, it's the same thing. There's

208
00:10:23,360 --> 00:10:25,880
Speaker 1: highly popular areas where they just throw a bunch of

209
00:10:25,920 --> 00:10:29,680
Speaker 1: the bonds into one shot, and that's called aggregate bonds.

210
00:10:30,480 --> 00:10:32,400
Speaker 1: So you said something and that that was interesting, which

211
00:10:32,440 --> 00:10:37,000
Speaker 1: was maturity date, which speaks to the bonds duration. In

212
00:10:37,080 --> 00:10:40,920
Speaker 1: a grocery store, that would be probably the vegetable section

213
00:10:41,120 --> 00:10:44,600
Speaker 1: right where this vegetable is going to go bad. Right,

214
00:10:45,160 --> 00:10:48,760
Speaker 1: So let's think about this, because bonds are boring. Vegetables

215
00:10:48,800 --> 00:10:50,520
Speaker 1: are boring. I don't really want to eat them, but

216
00:10:50,640 --> 00:10:53,800
Speaker 1: I'm going to. They're totally good for diversification, and that's

217
00:10:53,840 --> 00:10:57,880
Speaker 1: why most the older you get more more people have

218
00:10:58,000 --> 00:11:00,439
Speaker 1: more bonds than stocks. And here's the thing. E t

219
00:11:00,679 --> 00:11:05,719
Speaker 1: f s have transformed fixed income because on e t

220
00:11:05,840 --> 00:11:09,280
Speaker 1: F is an equity. Before you couldn't really like interact

221
00:11:09,360 --> 00:11:11,920
Speaker 1: with fixed incoming in the same way. You're You're right.

222
00:11:12,040 --> 00:11:15,560
Speaker 1: In fact, stocks trade on exchanges, bonds don't. It's called

223
00:11:15,600 --> 00:11:19,640
Speaker 1: over the county. You gotta call people literally, yeah, And

224
00:11:19,800 --> 00:11:22,520
Speaker 1: I always tell people I think the fixed income et

225
00:11:22,760 --> 00:11:26,800
Speaker 1: F showed the hunger that people had for a bond exchange.

226
00:11:27,240 --> 00:11:30,120
Speaker 1: People want to trade bonds like stocks. In fact, that's

227
00:11:30,160 --> 00:11:33,120
Speaker 1: again back to e t f s. They're big advantages.

228
00:11:33,160 --> 00:11:35,760
Speaker 1: They've standardized everything, just like a U S P port

229
00:11:35,840 --> 00:11:38,400
Speaker 1: or a gas pump. Everything now trades like equities, and

230
00:11:38,440 --> 00:11:40,480
Speaker 1: that's what people like trading the most. It's the best,

231
00:11:40,800 --> 00:11:44,720
Speaker 1: most transparent way to trade. So yes, that's a huge benefits.

232
00:11:44,760 --> 00:11:47,120
Speaker 1: So there's a lot of volume in fixed income ETFs,

233
00:11:47,440 --> 00:11:50,120
Speaker 1: but there's also a lot of long term investors, and

234
00:11:50,400 --> 00:11:53,440
Speaker 1: the most popular areas aggregate bond ETFs, where they basically

235
00:11:53,840 --> 00:11:57,240
Speaker 1: take a bunch of bonds, different types of treasuries. We're

236
00:11:57,240 --> 00:12:00,040
Speaker 1: talking how many bonds are we talking here? Somehow have

237
00:12:00,080 --> 00:12:03,319
Speaker 1: as much as seventeen thousand bonds and they charge the

238
00:12:03,400 --> 00:12:06,080
Speaker 1: six or seven basis points. So in a way those

239
00:12:06,120 --> 00:12:08,600
Speaker 1: are even a better bang for the buck per bond

240
00:12:09,080 --> 00:12:11,760
Speaker 1: than the broad market equities. So you've got an equity

241
00:12:11,800 --> 00:12:15,880
Speaker 1: wrapper wrapped around seventeen thousand vegetables. I don't know what

242
00:12:16,040 --> 00:12:18,880
Speaker 1: that is, maybe something like a crate a V eight

243
00:12:19,000 --> 00:12:22,480
Speaker 1: juice from Costco or something. That's basically what an aggregate

244
00:12:22,520 --> 00:12:24,559
Speaker 1: bond is. Just to kind of like talk about this

245
00:12:24,720 --> 00:12:27,240
Speaker 1: time thing, the thing about an e t F is

246
00:12:27,320 --> 00:12:29,640
Speaker 1: is the bond gets close from maturing, the e t

247
00:12:29,800 --> 00:12:32,559
Speaker 1: F has a goal and it would kick out the

248
00:12:32,600 --> 00:12:34,520
Speaker 1: bond as it gets closer. It's almost like the way

249
00:12:34,600 --> 00:12:36,599
Speaker 1: Walmart would just get rid of the old vegetables and

250
00:12:36,640 --> 00:12:39,160
Speaker 1: put new ones on the stand. That is again back

251
00:12:39,200 --> 00:12:41,719
Speaker 1: to the regeneration process of an index, and index is

252
00:12:41,800 --> 00:12:45,040
Speaker 1: not fixed in time. It's always regenerating because it looks

253
00:12:45,080 --> 00:12:48,319
Speaker 1: through criteria. Do bonds check off all these boxes? Yes,

254
00:12:48,360 --> 00:12:50,160
Speaker 1: they do, they're in the index if they don't boom

255
00:12:50,160 --> 00:12:52,959
Speaker 1: there out, So that is something that we need to, like,

256
00:12:53,080 --> 00:12:55,559
Speaker 1: I think, make clear. So my cart only has the

257
00:12:55,600 --> 00:12:59,079
Speaker 1: good vegetables in it. Yes, okay, what other kind of

258
00:12:59,160 --> 00:13:02,280
Speaker 1: bond E t F are there? So big pop there

259
00:13:02,360 --> 00:13:07,400
Speaker 1: is treasuries. Um again, boring is dirt, but they're very popular.

260
00:13:08,000 --> 00:13:10,040
Speaker 1: Treasuries don't yield a lot right now, so they're you

261
00:13:10,080 --> 00:13:11,400
Speaker 1: know a lot of people come in and out of

262
00:13:11,440 --> 00:13:14,840
Speaker 1: them based on where where rates are going. But treasuries

263
00:13:14,880 --> 00:13:17,160
Speaker 1: are really good as a buffer. You know, they can

264
00:13:17,480 --> 00:13:20,760
Speaker 1: provide a hedge in a portfolio. Typically treasuries go up

265
00:13:20,800 --> 00:13:22,439
Speaker 1: when you know the s H I T hits the

266
00:13:22,520 --> 00:13:26,760
Speaker 1: fan and everybody's like running around like crazy. Treasuries are

267
00:13:26,880 --> 00:13:29,439
Speaker 1: usually what the flight to quality. So people have a

268
00:13:29,440 --> 00:13:31,640
Speaker 1: little treasury. Even though it slows you down a little

269
00:13:32,160 --> 00:13:34,280
Speaker 1: in the rough days, they can really come in handy

270
00:13:34,400 --> 00:13:37,240
Speaker 1: and limit the losses on the equity side of the portfolio.

271
00:13:37,559 --> 00:13:39,679
Speaker 1: What have e t f s done for them? Right?

272
00:13:39,760 --> 00:13:42,079
Speaker 1: So treasuries, there's all kinds. You can get a treasury

273
00:13:42,120 --> 00:13:44,360
Speaker 1: e t F where the bonds are all maturing within

274
00:13:44,559 --> 00:13:46,719
Speaker 1: you know, six months to a year. That's called ultra

275
00:13:46,800 --> 00:13:48,520
Speaker 1: short term, then their short term, which is you know

276
00:13:48,600 --> 00:13:51,120
Speaker 1: one year to three years about, then there's intermediate, and

277
00:13:51,160 --> 00:13:53,520
Speaker 1: then down the line there's all all the way ones

278
00:13:53,559 --> 00:13:55,959
Speaker 1: that mature in twenty years. So it just depends on

279
00:13:56,160 --> 00:13:58,400
Speaker 1: what your time frame is and what you want to have.

280
00:13:58,600 --> 00:14:00,880
Speaker 1: The further you go out, the more they typically yield.

281
00:14:01,559 --> 00:14:04,320
Speaker 1: But that also means that they're more sensitive interest rates.

282
00:14:04,720 --> 00:14:07,480
Speaker 1: There's always a cost benefit you need to decide. And

283
00:14:07,679 --> 00:14:09,520
Speaker 1: by the way, we're not advisors here, you know, this

284
00:14:09,600 --> 00:14:12,839
Speaker 1: is definitely not but I think ultimately in the bond space,

285
00:14:13,000 --> 00:14:15,600
Speaker 1: this is where I shares rules. Vanguard's pretty big too,

286
00:14:15,640 --> 00:14:17,480
Speaker 1: but I shares really they came out with the first

287
00:14:17,520 --> 00:14:19,920
Speaker 1: bond ETFs l q D, which is the corporate bond

288
00:14:19,960 --> 00:14:23,080
Speaker 1: ETF t L t H y G, which is high yeled.

289
00:14:23,680 --> 00:14:26,720
Speaker 1: They really, I think innovated on the bond section, and

290
00:14:27,160 --> 00:14:28,600
Speaker 1: when you come out first with an e t F,

291
00:14:28,680 --> 00:14:31,480
Speaker 1: you typically get almost all the assets, and it's hard

292
00:14:31,520 --> 00:14:34,040
Speaker 1: to unseat the first to market products. So when you

293
00:14:34,120 --> 00:14:37,440
Speaker 1: look at I shares, they dominate, and so most people

294
00:14:37,600 --> 00:14:40,240
Speaker 1: use I shares for fixed income, but Vanguards coming up

295
00:14:40,320 --> 00:14:43,640
Speaker 1: and Schwab in State Street, they definitely have their little niches,

296
00:14:44,000 --> 00:14:47,400
Speaker 1: but that's definitely the dominant brand. So the egg bonds

297
00:14:47,440 --> 00:14:51,160
Speaker 1: all that that's plain vanilla stuff, there's also some stuff

298
00:14:51,200 --> 00:14:53,520
Speaker 1: that's not so plaint vanilla. That's right, you know. E

299
00:14:53,640 --> 00:14:56,360
Speaker 1: t F s. Again, they've they've wrapped up everything, and

300
00:14:56,400 --> 00:14:58,120
Speaker 1: that means sometimes they wrapped them some things that are

301
00:14:58,200 --> 00:15:01,320
Speaker 1: a little um more danger than others. And one area

302
00:15:01,400 --> 00:15:03,440
Speaker 1: that I think, I don't know, I think it's a

303
00:15:03,480 --> 00:15:04,960
Speaker 1: little bit more of a bad rap than it deserves,

304
00:15:05,000 --> 00:15:07,480
Speaker 1: but it definitely you should tread with caution is high

305
00:15:07,520 --> 00:15:11,000
Speaker 1: yield debt otherwise known as junk bonds. These are wrapped

306
00:15:11,080 --> 00:15:12,880
Speaker 1: up in our e t fs, and some people are

307
00:15:12,920 --> 00:15:14,840
Speaker 1: concerned that the e t F trades like an equity,

308
00:15:15,200 --> 00:15:17,120
Speaker 1: but the bonds aren't his liquid, and that's called a

309
00:15:17,160 --> 00:15:20,080
Speaker 1: liquidity mismatch. You know, high yield bond e t f

310
00:15:20,120 --> 00:15:22,560
Speaker 1: s have been around for eleven years and have survived

311
00:15:22,600 --> 00:15:25,360
Speaker 1: many sort of market spasms and sell offs, and you know,

312
00:15:25,480 --> 00:15:28,360
Speaker 1: people keep using them. The road tested. But I just

313
00:15:28,440 --> 00:15:30,400
Speaker 1: think it's important to note you are holding junk bonds.

314
00:15:30,440 --> 00:15:33,040
Speaker 1: But keep in mind, this is the world we're living in.

315
00:15:33,160 --> 00:15:36,240
Speaker 1: The FED has suppressed rates and force people to look

316
00:15:36,320 --> 00:15:39,280
Speaker 1: for yield in some unusual places. I love the fact

317
00:15:39,720 --> 00:15:44,480
Speaker 1: that these things are called high yield by professionals and

318
00:15:44,720 --> 00:15:47,800
Speaker 1: junk bonds by everybody else. Junk bonds gets you more

319
00:15:47,840 --> 00:15:50,320
Speaker 1: reads if you're a reporter, so you know, if you

320
00:15:50,400 --> 00:15:52,400
Speaker 1: put that in your headline, you get like double the hits.

321
00:15:52,440 --> 00:15:55,200
Speaker 1: So you see junk bonds more. But really, professionals call

322
00:15:55,240 --> 00:15:57,840
Speaker 1: them high yield. High yield means the company is more

323
00:15:57,880 --> 00:16:00,440
Speaker 1: likely to default, but also means they yield more, so

324
00:16:01,040 --> 00:16:03,680
Speaker 1: you know you got that going for you. Yeah, So

325
00:16:03,880 --> 00:16:06,840
Speaker 1: again there's the risk reward thing in all this. But

326
00:16:07,080 --> 00:16:08,920
Speaker 1: h y G is the big high yield one from

327
00:16:08,920 --> 00:16:11,480
Speaker 1: my shares Spider has J and K it's the junk

328
00:16:12,040 --> 00:16:15,680
Speaker 1: and these yield about five So compared to a treasury

329
00:16:15,800 --> 00:16:18,280
Speaker 1: right now that which is like what two point two

330
00:16:18,320 --> 00:16:21,440
Speaker 1: percent something like that, it's about double the yield. So

331
00:16:21,560 --> 00:16:24,120
Speaker 1: because rates have been low, especially from the FED and

332
00:16:24,200 --> 00:16:26,880
Speaker 1: the you know, the QI, over the years, it's pushed

333
00:16:26,920 --> 00:16:30,000
Speaker 1: a lot of regular people into high yield e t F.

334
00:16:30,080 --> 00:16:33,560
Speaker 1: But keep in mind high yield mutual funds have way

335
00:16:33,640 --> 00:16:36,320
Speaker 1: more in assets than high yield ETFs, but it's important

336
00:16:36,320 --> 00:16:39,640
Speaker 1: to determine it. High yield ETFs, in particular, most of

337
00:16:39,680 --> 00:16:41,480
Speaker 1: the things we talked about today and every day are

338
00:16:41,520 --> 00:16:44,040
Speaker 1: going to be playing vanilla. I would not consider high

339
00:16:44,080 --> 00:16:48,440
Speaker 1: yield ETFs playing vanilla. So Eric, we checked out the

340
00:16:48,520 --> 00:16:52,320
Speaker 1: two most popular sections of your store. My toddlers crying

341
00:16:52,360 --> 00:16:55,480
Speaker 1: at me. I've got this squeaky wheel on this grocery cart.

342
00:16:55,960 --> 00:16:59,360
Speaker 1: Where else can I go? Well, there are smaller sections

343
00:16:59,400 --> 00:17:01,560
Speaker 1: in the store, for sure, but for some people those

344
00:17:01,560 --> 00:17:04,040
Speaker 1: are important. International, I think is when we missed. I

345
00:17:04,119 --> 00:17:06,000
Speaker 1: guess that would be in the equity section, but sort

346
00:17:06,000 --> 00:17:08,520
Speaker 1: of like connected, It wouldn't be really part of it

347
00:17:08,560 --> 00:17:11,400
Speaker 1: because international some people invested in naturally, some people don't,

348
00:17:11,480 --> 00:17:14,359
Speaker 1: you know, but international could mean like a NETF to

349
00:17:14,440 --> 00:17:18,640
Speaker 1: invest in developed markets were emerging or single countries. That's

350
00:17:18,640 --> 00:17:20,959
Speaker 1: a pretty big area. We're talking upwards of maybe four

351
00:17:21,800 --> 00:17:25,440
Speaker 1: dollars as well. Um, that's a chunk right there. And

352
00:17:25,560 --> 00:17:28,200
Speaker 1: then you could look at something like commodities that really

353
00:17:28,320 --> 00:17:31,080
Speaker 1: is at its asset class unto its own and in

354
00:17:31,200 --> 00:17:33,480
Speaker 1: there you've got stuff like gold is very popular, there's

355
00:17:33,480 --> 00:17:37,840
Speaker 1: even silver, platinum, palladium. Then you've got like oil, there's

356
00:17:37,840 --> 00:17:41,720
Speaker 1: even a corny TF But you say those things, A

357
00:17:41,840 --> 00:17:45,280
Speaker 1: lot of that stuff it makes me really scared because

358
00:17:45,960 --> 00:17:49,480
Speaker 1: what business do I have buying oil? You probably don't

359
00:17:49,520 --> 00:17:51,560
Speaker 1: have any. So what you're bringing up, I think is

360
00:17:51,640 --> 00:17:53,520
Speaker 1: something I talk about a lot, which is the difference

361
00:17:53,560 --> 00:17:58,760
Speaker 1: between investment vehicles and trading tools and t F assets

362
00:17:58,800 --> 00:18:02,399
Speaker 1: are investment vehicles, again plain vanilla stuff that normal people use,

363
00:18:02,680 --> 00:18:05,000
Speaker 1: but ten percents in trading tools. I would put oil

364
00:18:05,200 --> 00:18:07,560
Speaker 1: in the trading tool category, but I put gold g

365
00:18:07,760 --> 00:18:11,000
Speaker 1: l D in the investment vehicles category. So when you're

366
00:18:11,040 --> 00:18:14,240
Speaker 1: in the commodities aisle, you really that's an extra care aisle.

367
00:18:14,880 --> 00:18:16,919
Speaker 1: In fact, in my book, I had two sections. One

368
00:18:17,080 --> 00:18:19,720
Speaker 1: was physically backed commodities, which is like gold and silver

369
00:18:19,960 --> 00:18:23,200
Speaker 1: more safe, and then futures based or derivatives. So in

370
00:18:23,240 --> 00:18:26,280
Speaker 1: Bloomberg we have a field called derivatives based or not,

371
00:18:27,119 --> 00:18:29,600
Speaker 1: and that's where I would separate them so fewer. In

372
00:18:29,680 --> 00:18:32,600
Speaker 1: my store, one of the aisles would be futures commodities

373
00:18:33,000 --> 00:18:35,560
Speaker 1: and one would be physically back commodities, and the one

374
00:18:35,640 --> 00:18:37,800
Speaker 1: that was future commodities would have like a dark curtain. Yeah,

375
00:18:37,840 --> 00:18:41,240
Speaker 1: I was gonna say, there's a guy standing the gatekeeper

376
00:18:41,440 --> 00:18:43,760
Speaker 1: allowing you entrance into that section. It's sort of like

377
00:18:43,840 --> 00:18:47,119
Speaker 1: the video store, which is a knock on ets. You

378
00:18:47,200 --> 00:18:49,600
Speaker 1: can trade these things as much as you want any

379
00:18:49,680 --> 00:18:53,880
Speaker 1: of it. And as an investor, and especially if I'm

380
00:18:53,920 --> 00:18:56,440
Speaker 1: not a professional investor, really all I should be doing

381
00:18:56,560 --> 00:19:00,159
Speaker 1: is buying and holding good products. Yeah, if you can

382
00:19:00,359 --> 00:19:02,320
Speaker 1: do that and withstand the temptation to trade a lot,

383
00:19:02,440 --> 00:19:05,639
Speaker 1: you'll do great. And that it's hard though, and this

384
00:19:05,840 --> 00:19:09,199
Speaker 1: is one of the criticism, especially from Vanguard's founder John Bogel.

385
00:19:10,040 --> 00:19:12,280
Speaker 1: He thinks e t f s trade a lot, and

386
00:19:12,359 --> 00:19:14,719
Speaker 1: therefore people are doing the wrong thing, which is trading,

387
00:19:14,800 --> 00:19:17,920
Speaker 1: and he's not wrong. He's not wrong. But there's also

388
00:19:18,119 --> 00:19:19,680
Speaker 1: a lot of buying and holding going on in e

389
00:19:19,760 --> 00:19:22,440
Speaker 1: t f s. So again, if you can withstand the

390
00:19:22,480 --> 00:19:25,399
Speaker 1: temptation to trade, and you can buy and hold. You

391
00:19:25,480 --> 00:19:28,320
Speaker 1: can benefit from the low cost, the lack of capital

392
00:19:28,359 --> 00:19:31,000
Speaker 1: gains which is good, and the diversification, so you get

393
00:19:31,040 --> 00:19:33,359
Speaker 1: all the benefits if you can just sort of, you know,

394
00:19:33,520 --> 00:19:38,480
Speaker 1: hold back from trading a lot. So Eric, it's time

395
00:19:38,560 --> 00:19:41,880
Speaker 1: for me to escape from your E. T. F fun

396
00:19:42,000 --> 00:19:47,960
Speaker 1: house and headed towards the door. As I'm heading to

397
00:19:48,080 --> 00:19:53,040
Speaker 1: the door, you're picturing me in a clown outfit, absolutely

398
00:19:53,119 --> 00:19:59,360
Speaker 1: picturing Thanks for coming. Did you enjoy your time? Anyways,

399
00:19:59,400 --> 00:20:02,639
Speaker 1: you're you're leaving. My my, why did I come here

400
00:20:02,680 --> 00:20:06,400
Speaker 1: in the first place? Because this is again we're gonna

401
00:20:06,520 --> 00:20:09,480
Speaker 1: basically go way down right here, we're gonna break it

402
00:20:09,520 --> 00:20:13,160
Speaker 1: all down, break it down. Ultimately, investing is about participating

403
00:20:13,280 --> 00:20:17,400
Speaker 1: and benefiting from capitalism. Right, if you hold all these stocks,

404
00:20:17,480 --> 00:20:20,680
Speaker 1: all these bonds, really what you're doing is you're just

405
00:20:20,840 --> 00:20:23,479
Speaker 1: benefiting from the value created every day by people who

406
00:20:23,520 --> 00:20:26,440
Speaker 1: go to work at these companies, make products, sell the products,

407
00:20:26,880 --> 00:20:28,800
Speaker 1: and a lot of that value has passed on through

408
00:20:29,000 --> 00:20:31,920
Speaker 1: dividends and the price of the stock going up. So

409
00:20:32,520 --> 00:20:34,760
Speaker 1: if you do that, you know, on average, the SMP

410
00:20:34,880 --> 00:20:37,680
Speaker 1: goes about eight percent a year on average, it's gone

411
00:20:37,760 --> 00:20:40,080
Speaker 1: up a little more than that lately. But that is

412
00:20:40,160 --> 00:20:43,120
Speaker 1: what you're doing it. The value created by all these

413
00:20:43,200 --> 00:20:45,720
Speaker 1: companies doing these things is what you're essentially doing. And

414
00:20:45,760 --> 00:20:47,520
Speaker 1: why are you doing that? Because if you held the

415
00:20:47,600 --> 00:20:51,080
Speaker 1: money under your mattress a, you wouldn't make any money

416
00:20:51,119 --> 00:20:53,439
Speaker 1: and be you would lose money because inflation would make

417
00:20:53,440 --> 00:20:56,520
Speaker 1: that money worth less. Yeah, so this is so you

418
00:20:56,600 --> 00:20:59,560
Speaker 1: can retire, get your Winnebago or in your case, and

419
00:20:59,680 --> 00:21:03,240
Speaker 1: jets right and go and play all the bingo you want.

420
00:21:03,960 --> 00:21:08,520
Speaker 1: I will take my jet ski to Florida and hit

421
00:21:08,640 --> 00:21:11,080
Speaker 1: the jackpot. I'm just you know, I can't help the

422
00:21:11,119 --> 00:21:13,080
Speaker 1: picture you with with a nice mullet. I love that

423
00:21:13,200 --> 00:21:14,720
Speaker 1: you think I'm going to be on a jet ski.

424
00:21:14,800 --> 00:21:16,919
Speaker 1: That's just like two. I think of you as being

425
00:21:16,960 --> 00:21:19,959
Speaker 1: in a Winnebago. I wouldn't mind that. I actually think

426
00:21:20,000 --> 00:21:21,760
Speaker 1: that seems like a good lifestyle writing the next great

427
00:21:21,760 --> 00:21:27,880
Speaker 1: American novel, you know, just going to general stores. General stores. Yeah,

428
00:21:27,960 --> 00:21:30,520
Speaker 1: I like general stores. You can't get away from the competition. Dan,

429
00:21:31,760 --> 00:21:33,680
Speaker 1: It's like check out what they got in their store.

430
00:21:33,960 --> 00:21:36,399
Speaker 1: Loo kind of etf she got over here over yonder.

431
00:21:41,359 --> 00:21:44,359
Speaker 1: Thanks for listening. To Trillions until next time. You can

432
00:21:44,400 --> 00:21:48,080
Speaker 1: find us on the Bloomberg Terminal, Bloomberg dot com, Apple Podcasts,

433
00:21:48,760 --> 00:21:50,840
Speaker 1: and probably a bunch of other places I haven't heard

434
00:21:50,840 --> 00:21:52,760
Speaker 1: about yet. We'd love to hear from you on Twitter.

435
00:21:53,200 --> 00:21:58,280
Speaker 1: He's at Eric Baltunus, I'm at Joe Webber Show. Trillions

436
00:21:58,359 --> 00:22:01,879
Speaker 1: is produced by Jordan Bell with help from Magnus Henrickson.

437
00:22:02,640 --> 00:22:07,440
Speaker 1: Francesca Levie is the head of Bloomberg Podcasts. By m

438
00:22:07,680 --> 00:22:10,480
Speaker 1: H m H