WEBVTT - The Paradox of Choice 0:00:05.880 --> 0:00:09.000 Welcome to Trillians. My name is Droll and I'm Eric Beltis. 0:00:09.440 --> 0:00:12.639 Last episode we talked about how ETFs have become such 0:00:12.680 --> 0:00:15.840 a big deal. This time we're going to try and 0:00:15.960 --> 0:00:19.560 make sense of the chaos that they've created. Because there's 0:00:19.640 --> 0:00:23.119 t these things. Some of them might blow up and 0:00:23.200 --> 0:00:26.160 make me rich, others might blow up and make me poor. 0:00:26.880 --> 0:00:30.760 One a Day launches in the US. Eric, how am 0:00:30.800 --> 0:00:34.479 I supposed to make sense of all that chaos? I 0:00:34.560 --> 0:00:38.600 don't know. No, I do know. I see you next week. Look, 0:00:38.640 --> 0:00:41.159 it's it's not easy. There's twenty Like you said, there's well, 0:00:41.159 --> 0:00:43.320 there's two thousand eighty seven. But he was counting. Who's 0:00:43.320 --> 0:00:45.639 got some good fact? Jack? Thank you? And my job 0:00:45.720 --> 0:00:49.480 at Bloomberg for half a decade was to make order 0:00:49.560 --> 0:00:52.640 out of this chaos. I looked at myself in data 0:00:53.080 --> 0:00:55.240 when I worked there before I got to research as 0:00:55.360 --> 0:00:58.960 the guy running a Walmart, and instead of stuff, it 0:00:59.080 --> 0:01:01.000 was E t F s, and I had to organize 0:01:01.040 --> 0:01:03.960 them in like a taxonomy so that when you walked 0:01:04.000 --> 0:01:07.319 into my proverbial et F store, you know exactly where 0:01:07.360 --> 0:01:08.680 to go and could find the E T F that 0:01:08.720 --> 0:01:12.520 you wanted and evaluate it within say ten to twenty seconds, 0:01:13.319 --> 0:01:15.080 and so I'll share it a little bit about what 0:01:15.160 --> 0:01:17.440 I did, but ultimately, you know, there are a lot 0:01:17.480 --> 0:01:19.360 of E t F s. Let's bring in one of 0:01:19.400 --> 0:01:22.680 the questions our listeners asked on Twitter because it was 0:01:23.000 --> 0:01:25.600 literally about one of the topics that we're gonna get 0:01:25.600 --> 0:01:27.800 to today. Yeah. So, and by the way, please tweet 0:01:27.840 --> 0:01:30.800 it at at Eric Beltnis or at Joel Webber Show 0:01:31.000 --> 0:01:33.440 if you have any questions. Will definitely pick some. This 0:01:33.600 --> 0:01:36.120 one was from Ken Natal, who's a financial planner in 0:01:36.200 --> 0:01:38.959 New York. He says, can you discuss the various structures 0:01:39.000 --> 0:01:41.120 and E t F s? And he says, for example, 0:01:41.319 --> 0:01:44.160 s P Y versus V O O versus IVV, which 0:01:44.200 --> 0:01:48.920 are all really basic plane vanilla s t F H. 0:01:48.920 --> 0:01:50.760 We actually touched on these in the first one, but 0:01:51.480 --> 0:01:54.560 even those three that check the same index and they 0:01:54.640 --> 0:01:58.080 do have small differences. We'll get to it later in 0:01:58.120 --> 0:02:00.080 the show when we get to the equity aisle, so 0:02:00.200 --> 0:02:02.560 to speak, but that I think is indicative of the 0:02:02.600 --> 0:02:05.280 fact that there are a lot of small differences even 0:02:05.320 --> 0:02:08.639 when you are in the same species. So this episode, 0:02:09.360 --> 0:02:12.840 meet the E t F s. Okay, So I just 0:02:12.919 --> 0:02:16.040 walked in to Eric's E t F store which looks 0:02:16.040 --> 0:02:18.799 a little bit like a Walmart. And I've got my 0:02:19.200 --> 0:02:21.960 grocery cart here and it's got a squeaky wheel. Can 0:02:22.000 --> 0:02:24.919 you help fix that? No, I work at Walmart. Okay, 0:02:25.000 --> 0:02:27.320 well maybe you can help me make sense at this store. 0:02:27.600 --> 0:02:30.680 What's your biggest department? Sure? So, if you think about 0:02:30.720 --> 0:02:33.519 a department in terms of organizing E t F s, 0:02:33.600 --> 0:02:35.800 we would say that mapping would be an asset class. 0:02:36.240 --> 0:02:38.440 So when you think of departments in this E t 0:02:38.600 --> 0:02:41.200 F store, think of them divided by asset classes. The 0:02:41.240 --> 0:02:43.720 biggest asset class, by far as equities. In terms of 0:02:43.800 --> 0:02:47.200 e t F S, about of the volume and assets 0:02:47.240 --> 0:02:49.320 are an equity TF so these are ones that hold stocks, 0:02:50.000 --> 0:02:52.240 and when you go to that section, there's different aisles 0:02:52.280 --> 0:02:54.799 for different types of equity t s. So when I 0:02:54.960 --> 0:02:59.120 think about how that responds for me, I think about 0:02:59.360 --> 0:03:02.040 walking in to a grocery store when I was a kid, 0:03:02.840 --> 0:03:06.600 and the cereal isle was a daunting place because my 0:03:06.760 --> 0:03:09.240 mom wanna only let me have sugar cereal one day 0:03:09.240 --> 0:03:11.200 a week, which was Saturday, and that was when I 0:03:11.280 --> 0:03:14.760 watched Saturday morning cartoons. Poor guy, Poor Guy. So I 0:03:14.800 --> 0:03:17.600 basically got to pick the one sugar cereal that I'd 0:03:17.639 --> 0:03:20.280 have for that weekend, and it was like Lucky Charms, 0:03:20.480 --> 0:03:23.880 Cocoa Puff, Captain Crunch, and they're all, so that was 0:03:23.960 --> 0:03:27.880 your Monday through Friday days a week. So they're all 0:03:28.000 --> 0:03:30.959 yelling at me for my attention. And that's sort of 0:03:31.040 --> 0:03:33.680 how I feel about the equity aisle. Can you let 0:03:33.720 --> 0:03:36.600 me make sense of the et F? Iile like it's 0:03:36.640 --> 0:03:39.720 a cereal aisle? Sure, I mean, And it's a good 0:03:39.760 --> 0:03:42.360 metaphor because some of the e t F is a 0:03:42.400 --> 0:03:45.640 little healthier for you than others. I think a basic 0:03:45.760 --> 0:03:48.960 way to divide equities is by market cap. So there 0:03:49.040 --> 0:03:51.520 could be like a large cap aisle, a mid cap bile, 0:03:51.560 --> 0:03:54.040 and a small cap bile, and within there there's different sections. 0:03:54.120 --> 0:03:57.960 But take large cap but that's probably I mean five 0:03:58.080 --> 0:04:00.880 six seven billion dollars somewhere in the ballpark. So I'd 0:04:00.920 --> 0:04:02.720 say a quarter of all assets are going to be 0:04:02.760 --> 0:04:04.520 a large cups. So maybe there's two aisles, but you 0:04:04.640 --> 0:04:07.520 get the idea. So large caps are going to hold 0:04:07.600 --> 0:04:10.000 names like Apple and Google and and those are very 0:04:10.080 --> 0:04:12.800 popular have a lot of assets, but again there's differences 0:04:12.840 --> 0:04:16.120 between each of the products. And again the biggest large 0:04:16.200 --> 0:04:19.000 caps are ones that we've talked about before and that 0:04:19.080 --> 0:04:21.800 we had a question about, which are sp These are 0:04:21.880 --> 0:04:25.719 perfect example for why you need to Basically we say 0:04:25.720 --> 0:04:27.800 in the industry, open the hood, or in this case, 0:04:28.040 --> 0:04:30.440 look on the back of the cereal box. You know, 0:04:30.560 --> 0:04:33.479 forget about the cartoon character that's like, you know, jazz 0:04:33.520 --> 0:04:35.839 handsing on the front. Yeah, that's like making you lose 0:04:35.880 --> 0:04:37.960 your mind. You turn the box over and you look 0:04:37.960 --> 0:04:40.360 at the ingredients, right, and this is sort of like 0:04:40.440 --> 0:04:43.240 looking at Okay, what are the holdings. So when you 0:04:43.320 --> 0:04:45.680 take the SMP five hundred, you're gonna see Apple X on. 0:04:45.720 --> 0:04:47.680 It's gonna make you feel very safe because you're gonna 0:04:47.680 --> 0:04:52.400 recognize all the companies because in the smptfs and most 0:04:52.440 --> 0:04:56.080 ETFs in general, they market cap wait the stocks, so 0:04:56.200 --> 0:04:59.480 the bigger ones get the biggest waiting, and so ultimately 0:04:59.640 --> 0:05:02.400 when you look over at smp F t F, you're 0:05:02.400 --> 0:05:05.400 gonna see those companies. Now, the difference in the question 0:05:05.560 --> 0:05:08.880 that was asked is that s p Y is the 0:05:08.960 --> 0:05:11.599 biggest oldest e t F. Right, It's got two hundred 0:05:11.600 --> 0:05:14.080 and fifty billion dollars. It's a giant I called the 0:05:14.160 --> 0:05:16.240 King of ETFs. You could argue it's the king of 0:05:16.279 --> 0:05:18.600 equities because it trades four times more than Apple, the 0:05:18.600 --> 0:05:22.120 second most trade equity anyway. S p Y is structured 0:05:22.120 --> 0:05:23.800 as a unit investment trust. That was how the first 0:05:23.880 --> 0:05:26.200 couple of e ts were designed the mid nineties, and 0:05:26.320 --> 0:05:28.440 the other ones I VV which is I shares, and 0:05:28.560 --> 0:05:30.880 VOO which is Vanguard are structured is open end companies. 0:05:30.920 --> 0:05:33.120 Now for you out there, if you haven't fallen asleep already, 0:05:33.440 --> 0:05:35.360 we're not going to spend much time in these structures, 0:05:35.440 --> 0:05:38.839 but it does make a difference in small ways. Unit 0:05:38.839 --> 0:05:41.320 investment trust s p Y can't invest the dividends back 0:05:41.360 --> 0:05:43.960 into the fund every day, and it can't do securities, Lenny, 0:05:44.000 --> 0:05:46.800 there's there's small little things on the margins. It's not 0:05:46.880 --> 0:05:48.800 a big deal. What I was gonna say about this. 0:05:49.480 --> 0:05:54.480 It reminds me of vanilla. There are different types of vanilla. 0:05:54.720 --> 0:05:57.920 There's vanilla being there's fringe vanilla, and that's sort of 0:05:57.960 --> 0:06:01.120 what these are. Yeah, exactly. And if you pick SPY 0:06:01.320 --> 0:06:03.320 I V V your VO and you held a ten years, 0:06:03.400 --> 0:06:05.560 it doesn't make a difference really. I mean, you're going 0:06:05.600 --> 0:06:08.360 to get the SMPF having to return minus a couple 0:06:08.400 --> 0:06:13.800 of basis points. So large cap we're talking cheerios, grape nuts, 0:06:14.360 --> 0:06:18.600 raisin brand a little bit, maybe good one. Let's talk 0:06:18.600 --> 0:06:21.840 about MidCap, sure, mid caps a little little you know. 0:06:21.880 --> 0:06:24.200 I always refer to mid cap as the Jan Brady 0:06:24.880 --> 0:06:28.480 of market cap. Well, it's overlooked all the time. It's 0:06:28.520 --> 0:06:31.520 the middle child. Large caps are the biggest, and small 0:06:31.600 --> 0:06:33.560 caps are like you know, they're a little more volatile, 0:06:33.600 --> 0:06:35.400 they're more fun, you can make or lose more money. 0:06:35.720 --> 0:06:37.520 Midcaps are kind of stuck in the middle, and you 0:06:37.560 --> 0:06:39.320 know there you don't hear a lot about They have 0:06:39.320 --> 0:06:41.240 a hundred billion dollars. That's a pretty big section. They 0:06:41.279 --> 0:06:43.760 could be their own aisle for sure. And mid caps 0:06:43.760 --> 0:06:45.719 will be companies that I would say, if you opened 0:06:45.800 --> 0:06:47.680 up a mid cap etf and you looked or you 0:06:47.680 --> 0:06:49.080 want to turn with the box over and looked at 0:06:49.120 --> 0:06:51.599 what's in it, you probably would only recognize a couple 0:06:51.600 --> 0:06:54.000 of companies, like something like Urban Outfitters. I believe is 0:06:54.000 --> 0:06:56.039 a mid cap. I shopped there, But some of these 0:06:56.080 --> 0:06:58.160 other companies that are in the energy business and industrials. 0:06:58.200 --> 0:07:02.080 You are so an an outfitter shopper says it all. 0:07:02.400 --> 0:07:04.680 I love that about you. Yeah, the ironic T shirts. 0:07:04.720 --> 0:07:07.080 At least the Urban Afters has those ironic T shirts 0:07:07.360 --> 0:07:11.840 before they make it a target two years before. So 0:07:11.960 --> 0:07:14.680 small cap this is like the spicy stuff. Okay, you know, 0:07:14.800 --> 0:07:17.200 this is like the stuff you had on Saturday. Maybe 0:07:17.240 --> 0:07:19.600 not that bad, but definitely raise raisin brand, a little 0:07:19.600 --> 0:07:22.600 sugar on it. Whatever. Right, small caps, there's actually more 0:07:22.600 --> 0:07:24.920 of them. So like a typical small cap ETF like 0:07:25.000 --> 0:07:27.880 i WM or VV, those are the tickers for two 0:07:27.880 --> 0:07:31.280 big small cap ETFs. They're gonna have two thousand plus 0:07:31.440 --> 0:07:34.880 or stocks and they might even dip into what's called 0:07:36.400 --> 0:07:39.520 Yeah that's good though, because remember we talked about diversification. 0:07:39.960 --> 0:07:43.520 You definitely want to be diversified there if you pick 0:07:43.600 --> 0:07:47.440 the right small cap small caps are ultimately like investing 0:07:47.480 --> 0:07:51.080 in like Toddler's, you know what I mean? They you know, 0:07:51.240 --> 0:07:54.600 they haven't really like they're not mature. I know about Toddler's. 0:07:54.800 --> 0:07:57.880 Oh yeah, I know, me too. That's why my voices scratchy. 0:07:58.000 --> 0:07:59.440 My two year old God knows what he's bringing home 0:07:59.480 --> 0:08:02.320 from daycare. You know, as long as we're hanging out 0:08:02.360 --> 0:08:05.560 in this serial aisle. Remember those little combo packs that 0:08:05.680 --> 0:08:09.120 you could get like eight different types of cereal like 0:08:09.200 --> 0:08:12.080 apple jacks and everything in one, and they'll always be 0:08:12.120 --> 0:08:16.160 like one leftover. Yeah that nobody ever wanted geaties usually, Yeah, 0:08:16.200 --> 0:08:19.160 it was all the fun ones. And then that's like 0:08:19.200 --> 0:08:21.400 the freed to lays of the cereal pack. What is 0:08:21.560 --> 0:08:25.560 that combo pack in your world? Great metaphor if what 0:08:25.880 --> 0:08:27.760 we just said about going through different aisles and picking 0:08:27.840 --> 0:08:30.520 large caps, what a lot of people do is say 0:08:30.520 --> 0:08:31.960 the hell with it. I just want the whole thing 0:08:32.000 --> 0:08:34.720 in one shot. And that's called broad market ETFs. They're 0:08:34.840 --> 0:08:37.400 very popular. So here's where you get the best bang 0:08:37.480 --> 0:08:39.240 for your buck in my opinion, because you're gonna get 0:08:39.240 --> 0:08:41.400 the whole stock market. We're talking about four thousand stocks 0:08:41.520 --> 0:08:45.160 roughly for point oh four percent or point oh five percent. 0:08:45.800 --> 0:08:48.560 So if we talk about that ten thousand dollars proverbly 0:08:48.640 --> 0:08:51.400 that you put into an ETF, here, you're gonna get 0:08:51.679 --> 0:08:55.599 one thousand stocks per dollar per year, and that is 0:08:55.920 --> 0:08:58.160 that's almost free basically. I mean that talk about the 0:08:58.240 --> 0:09:01.600 pizza slice that I could that's even cheaper than pizza 0:09:02.040 --> 0:09:04.520 in like Kansas, let alone penn Station. And then you're 0:09:04.559 --> 0:09:09.079 invested across all equities, right, not just large cap, mid cap, 0:09:09.120 --> 0:09:12.760 small cap. But again back to the whole diversification paradox. 0:09:13.240 --> 0:09:17.040 If you do that, you're so diversified, you're certainly not 0:09:17.120 --> 0:09:20.040 going to hit the lottery. You're just gonna slowly move 0:09:20.160 --> 0:09:22.800 with the whole market. And again, some people like to 0:09:23.000 --> 0:09:25.680 the juice of picking an individual name, but for most 0:09:25.720 --> 0:09:29.040 people that is really a good a good deal, a 0:09:29.080 --> 0:09:32.760 good method. So broad market ETFs are hugely popular. They 0:09:32.760 --> 0:09:34.679 don't make the press a lot because they're so boring, 0:09:35.440 --> 0:09:43.280 but they're they're very popular. Eric, that's my my cart. 0:09:43.920 --> 0:09:46.240 I'm ready to go check out the next biggest section 0:09:46.440 --> 0:09:49.160 of your store, which is which is what Yeah, good 0:09:49.200 --> 0:09:52.320 because I thought you were sick or something. Anyway, Um, 0:09:52.400 --> 0:09:55.800 the next biggest section easily fixed income, which is bonds. Right, 0:09:55.880 --> 0:09:59.480 so bonds can be boring, do not fall asleep, you know. 0:09:59.600 --> 0:10:01.320 The way I try to explain bonds of people are 0:10:01.320 --> 0:10:04.199 exciting them about them is that fixed income is really 0:10:04.880 --> 0:10:08.600 like like a three dimensional game. It's like chess, whereas 0:10:08.600 --> 0:10:12.160 equities are like checkers because bonds have a maturity date, 0:10:12.200 --> 0:10:15.240 so there's an extra time element in valuing them and stuff. 0:10:15.520 --> 0:10:17.079 But the good news about e t F s is 0:10:17.160 --> 0:10:20.440 you don't really need to worry about a ton of that. Ultimately, 0:10:20.840 --> 0:10:23.280 in the fixed income section, it's the same thing. There's 0:10:23.360 --> 0:10:25.880 highly popular areas where they just throw a bunch of 0:10:25.920 --> 0:10:29.680 the bonds into one shot, and that's called aggregate bonds. 0:10:30.480 --> 0:10:32.400 So you said something and that that was interesting, which 0:10:32.440 --> 0:10:37.000 was maturity date, which speaks to the bonds duration. In 0:10:37.080 --> 0:10:40.920 a grocery store, that would be probably the vegetable section 0:10:41.120 --> 0:10:44.600 right where this vegetable is going to go bad. Right, 0:10:45.160 --> 0:10:48.760 So let's think about this, because bonds are boring. Vegetables 0:10:48.800 --> 0:10:50.520 are boring. I don't really want to eat them, but 0:10:50.640 --> 0:10:53.800 I'm going to. They're totally good for diversification, and that's 0:10:53.840 --> 0:10:57.880 why most the older you get more more people have 0:10:58.000 --> 0:11:00.439 more bonds than stocks. And here's the thing. E t 0:11:00.679 --> 0:11:05.719 f s have transformed fixed income because on e t 0:11:05.840 --> 0:11:09.280 F is an equity. Before you couldn't really like interact 0:11:09.360 --> 0:11:11.920 with fixed incoming in the same way. You're You're right. 0:11:12.040 --> 0:11:15.560 In fact, stocks trade on exchanges, bonds don't. It's called 0:11:15.600 --> 0:11:19.640 over the county. You gotta call people literally, yeah, And 0:11:19.800 --> 0:11:22.520 I always tell people I think the fixed income et 0:11:22.760 --> 0:11:26.800 F showed the hunger that people had for a bond exchange. 0:11:27.240 --> 0:11:30.120 People want to trade bonds like stocks. In fact, that's 0:11:30.160 --> 0:11:33.120 again back to e t f s. They're big advantages. 0:11:33.160 --> 0:11:35.760 They've standardized everything, just like a U S P port 0:11:35.840 --> 0:11:38.400 or a gas pump. Everything now trades like equities, and 0:11:38.440 --> 0:11:40.480 that's what people like trading the most. It's the best, 0:11:40.800 --> 0:11:44.720 most transparent way to trade. So yes, that's a huge benefits. 0:11:44.760 --> 0:11:47.120 So there's a lot of volume in fixed income ETFs, 0:11:47.440 --> 0:11:50.120 but there's also a lot of long term investors, and 0:11:50.400 --> 0:11:53.440 the most popular areas aggregate bond ETFs, where they basically 0:11:53.840 --> 0:11:57.240 take a bunch of bonds, different types of treasuries. We're 0:11:57.240 --> 0:12:00.040 talking how many bonds are we talking here? Somehow have 0:12:00.080 --> 0:12:03.319 as much as seventeen thousand bonds and they charge the 0:12:03.400 --> 0:12:06.080 six or seven basis points. So in a way those 0:12:06.120 --> 0:12:08.600 are even a better bang for the buck per bond 0:12:09.080 --> 0:12:11.760 than the broad market equities. So you've got an equity 0:12:11.800 --> 0:12:15.880 wrapper wrapped around seventeen thousand vegetables. I don't know what 0:12:16.040 --> 0:12:18.880 that is, maybe something like a crate a V eight 0:12:19.000 --> 0:12:22.480 juice from Costco or something. That's basically what an aggregate 0:12:22.520 --> 0:12:24.559 bond is. Just to kind of like talk about this 0:12:24.720 --> 0:12:27.240 time thing, the thing about an e t F is 0:12:27.320 --> 0:12:29.640 is the bond gets close from maturing, the e t 0:12:29.800 --> 0:12:32.559 F has a goal and it would kick out the 0:12:32.600 --> 0:12:34.520 bond as it gets closer. It's almost like the way 0:12:34.600 --> 0:12:36.599 Walmart would just get rid of the old vegetables and 0:12:36.640 --> 0:12:39.160 put new ones on the stand. That is again back 0:12:39.200 --> 0:12:41.719 to the regeneration process of an index, and index is 0:12:41.800 --> 0:12:45.040 not fixed in time. It's always regenerating because it looks 0:12:45.080 --> 0:12:48.319 through criteria. Do bonds check off all these boxes? Yes, 0:12:48.360 --> 0:12:50.160 they do, they're in the index if they don't boom 0:12:50.160 --> 0:12:52.959 there out, So that is something that we need to, like, 0:12:53.080 --> 0:12:55.559 I think, make clear. So my cart only has the 0:12:55.600 --> 0:12:59.079 good vegetables in it. Yes, okay, what other kind of 0:12:59.160 --> 0:13:02.280 bond E t F are there? So big pop there 0:13:02.360 --> 0:13:07.400 is treasuries. Um again, boring is dirt, but they're very popular. 0:13:08.000 --> 0:13:10.040 Treasuries don't yield a lot right now, so they're you 0:13:10.080 --> 0:13:11.400 know a lot of people come in and out of 0:13:11.440 --> 0:13:14.840 them based on where where rates are going. But treasuries 0:13:14.880 --> 0:13:17.160 are really good as a buffer. You know, they can 0:13:17.480 --> 0:13:20.760 provide a hedge in a portfolio. Typically treasuries go up 0:13:20.800 --> 0:13:22.439 when you know the s H I T hits the 0:13:22.520 --> 0:13:26.760 fan and everybody's like running around like crazy. Treasuries are 0:13:26.880 --> 0:13:29.439 usually what the flight to quality. So people have a 0:13:29.440 --> 0:13:31.640 little treasury. Even though it slows you down a little 0:13:32.160 --> 0:13:34.280 in the rough days, they can really come in handy 0:13:34.400 --> 0:13:37.240 and limit the losses on the equity side of the portfolio. 0:13:37.559 --> 0:13:39.679 What have e t f s done for them? Right? 0:13:39.760 --> 0:13:42.079 So treasuries, there's all kinds. You can get a treasury 0:13:42.120 --> 0:13:44.360 e t F where the bonds are all maturing within 0:13:44.559 --> 0:13:46.719 you know, six months to a year. That's called ultra 0:13:46.800 --> 0:13:48.520 short term, then their short term, which is you know 0:13:48.600 --> 0:13:51.120 one year to three years about, then there's intermediate, and 0:13:51.160 --> 0:13:53.520 then down the line there's all all the way ones 0:13:53.559 --> 0:13:55.959 that mature in twenty years. So it just depends on 0:13:56.160 --> 0:13:58.400 what your time frame is and what you want to have. 0:13:58.600 --> 0:14:00.880 The further you go out, the more they typically yield. 0:14:01.559 --> 0:14:04.320 But that also means that they're more sensitive interest rates. 0:14:04.720 --> 0:14:07.480 There's always a cost benefit you need to decide. And 0:14:07.679 --> 0:14:09.520 by the way, we're not advisors here, you know, this 0:14:09.600 --> 0:14:12.839 is definitely not but I think ultimately in the bond space, 0:14:13.000 --> 0:14:15.600 this is where I shares rules. Vanguard's pretty big too, 0:14:15.640 --> 0:14:17.480 but I shares really they came out with the first 0:14:17.520 --> 0:14:19.920 bond ETFs l q D, which is the corporate bond 0:14:19.960 --> 0:14:23.080 ETF t L t H y G, which is high yeled. 0:14:23.680 --> 0:14:26.720 They really, I think innovated on the bond section, and 0:14:27.160 --> 0:14:28.600 when you come out first with an e t F, 0:14:28.680 --> 0:14:31.480 you typically get almost all the assets, and it's hard 0:14:31.520 --> 0:14:34.040 to unseat the first to market products. So when you 0:14:34.120 --> 0:14:37.440 look at I shares, they dominate, and so most people 0:14:37.600 --> 0:14:40.240 use I shares for fixed income, but Vanguards coming up 0:14:40.320 --> 0:14:43.640 and Schwab in State Street, they definitely have their little niches, 0:14:44.000 --> 0:14:47.400 but that's definitely the dominant brand. So the egg bonds 0:14:47.440 --> 0:14:51.160 all that that's plain vanilla stuff, there's also some stuff 0:14:51.200 --> 0:14:53.520 that's not so plaint vanilla. That's right, you know. E 0:14:53.640 --> 0:14:56.360 t F s. Again, they've they've wrapped up everything, and 0:14:56.400 --> 0:14:58.120 that means sometimes they wrapped them some things that are 0:14:58.200 --> 0:15:01.320 a little um more danger than others. And one area 0:15:01.400 --> 0:15:03.440 that I think, I don't know, I think it's a 0:15:03.480 --> 0:15:04.960 little bit more of a bad rap than it deserves, 0:15:05.000 --> 0:15:07.480 but it definitely you should tread with caution is high 0:15:07.520 --> 0:15:11.000 yield debt otherwise known as junk bonds. These are wrapped 0:15:11.080 --> 0:15:12.880 up in our e t fs, and some people are 0:15:12.920 --> 0:15:14.840 concerned that the e t F trades like an equity, 0:15:15.200 --> 0:15:17.120 but the bonds aren't his liquid, and that's called a 0:15:17.160 --> 0:15:20.080 liquidity mismatch. You know, high yield bond e t f 0:15:20.120 --> 0:15:22.560 s have been around for eleven years and have survived 0:15:22.600 --> 0:15:25.360 many sort of market spasms and sell offs, and you know, 0:15:25.480 --> 0:15:28.360 people keep using them. The road tested. But I just 0:15:28.440 --> 0:15:30.400 think it's important to note you are holding junk bonds. 0:15:30.440 --> 0:15:33.040 But keep in mind, this is the world we're living in. 0:15:33.160 --> 0:15:36.240 The FED has suppressed rates and force people to look 0:15:36.320 --> 0:15:39.280 for yield in some unusual places. I love the fact 0:15:39.720 --> 0:15:44.480 that these things are called high yield by professionals and 0:15:44.720 --> 0:15:47.800 junk bonds by everybody else. Junk bonds gets you more 0:15:47.840 --> 0:15:50.320 reads if you're a reporter, so you know, if you 0:15:50.400 --> 0:15:52.400 put that in your headline, you get like double the hits. 0:15:52.440 --> 0:15:55.200 So you see junk bonds more. But really, professionals call 0:15:55.240 --> 0:15:57.840 them high yield. High yield means the company is more 0:15:57.880 --> 0:16:00.440 likely to default, but also means they yield more, so 0:16:01.040 --> 0:16:03.680 you know you got that going for you. Yeah, So 0:16:03.880 --> 0:16:06.840 again there's the risk reward thing in all this. But 0:16:07.080 --> 0:16:08.920 h y G is the big high yield one from 0:16:08.920 --> 0:16:11.480 my shares Spider has J and K it's the junk 0:16:12.040 --> 0:16:15.680 and these yield about five So compared to a treasury 0:16:15.800 --> 0:16:18.280 right now that which is like what two point two 0:16:18.320 --> 0:16:21.440 percent something like that, it's about double the yield. So 0:16:21.560 --> 0:16:24.120 because rates have been low, especially from the FED and 0:16:24.200 --> 0:16:26.880 the you know, the QI, over the years, it's pushed 0:16:26.920 --> 0:16:30.000 a lot of regular people into high yield e t F. 0:16:30.080 --> 0:16:33.560 But keep in mind high yield mutual funds have way 0:16:33.640 --> 0:16:36.320 more in assets than high yield ETFs, but it's important 0:16:36.320 --> 0:16:39.640 to determine it. High yield ETFs, in particular, most of 0:16:39.680 --> 0:16:41.480 the things we talked about today and every day are 0:16:41.520 --> 0:16:44.040 going to be playing vanilla. I would not consider high 0:16:44.080 --> 0:16:48.440 yield ETFs playing vanilla. So Eric, we checked out the 0:16:48.520 --> 0:16:52.320 two most popular sections of your store. My toddlers crying 0:16:52.360 --> 0:16:55.480 at me. I've got this squeaky wheel on this grocery cart. 0:16:55.960 --> 0:16:59.360 Where else can I go? Well, there are smaller sections 0:16:59.400 --> 0:17:01.560 in the store, for sure, but for some people those 0:17:01.560 --> 0:17:04.040 are important. International, I think is when we missed. I 0:17:04.119 --> 0:17:06.000 guess that would be in the equity section, but sort 0:17:06.000 --> 0:17:08.520 of like connected, It wouldn't be really part of it 0:17:08.560 --> 0:17:11.400 because international some people invested in naturally, some people don't, 0:17:11.480 --> 0:17:14.359 you know, but international could mean like a NETF to 0:17:14.440 --> 0:17:18.640 invest in developed markets were emerging or single countries. That's 0:17:18.640 --> 0:17:20.959 a pretty big area. We're talking upwards of maybe four 0:17:21.800 --> 0:17:25.440 dollars as well. Um, that's a chunk right there. And 0:17:25.560 --> 0:17:28.200 then you could look at something like commodities that really 0:17:28.320 --> 0:17:31.080 is at its asset class unto its own and in 0:17:31.200 --> 0:17:33.480 there you've got stuff like gold is very popular, there's 0:17:33.480 --> 0:17:37.840 even silver, platinum, palladium. Then you've got like oil, there's 0:17:37.840 --> 0:17:41.720 even a corny TF But you say those things, A 0:17:41.840 --> 0:17:45.280 lot of that stuff it makes me really scared because 0:17:45.960 --> 0:17:49.480 what business do I have buying oil? You probably don't 0:17:49.520 --> 0:17:51.560 have any. So what you're bringing up, I think is 0:17:51.640 --> 0:17:53.520 something I talk about a lot, which is the difference 0:17:53.560 --> 0:17:58.760 between investment vehicles and trading tools and t F assets 0:17:58.800 --> 0:18:02.399 are investment vehicles, again plain vanilla stuff that normal people use, 0:18:02.680 --> 0:18:05.000 but ten percents in trading tools. I would put oil 0:18:05.200 --> 0:18:07.560 in the trading tool category, but I put gold g 0:18:07.760 --> 0:18:11.000 l D in the investment vehicles category. So when you're 0:18:11.040 --> 0:18:14.240 in the commodities aisle, you really that's an extra care aisle. 0:18:14.880 --> 0:18:16.919 In fact, in my book, I had two sections. One 0:18:17.080 --> 0:18:19.720 was physically backed commodities, which is like gold and silver 0:18:19.960 --> 0:18:23.200 more safe, and then futures based or derivatives. So in 0:18:23.240 --> 0:18:26.280 Bloomberg we have a field called derivatives based or not, 0:18:27.119 --> 0:18:29.600 and that's where I would separate them so fewer. In 0:18:29.680 --> 0:18:32.600 my store, one of the aisles would be futures commodities 0:18:33.000 --> 0:18:35.560 and one would be physically back commodities, and the one 0:18:35.640 --> 0:18:37.800 that was future commodities would have like a dark curtain. Yeah, 0:18:37.840 --> 0:18:41.240 I was gonna say, there's a guy standing the gatekeeper 0:18:41.440 --> 0:18:43.760 allowing you entrance into that section. It's sort of like 0:18:43.840 --> 0:18:47.119 the video store, which is a knock on ets. You 0:18:47.200 --> 0:18:49.600 can trade these things as much as you want any 0:18:49.680 --> 0:18:53.880 of it. And as an investor, and especially if I'm 0:18:53.920 --> 0:18:56.440 not a professional investor, really all I should be doing 0:18:56.560 --> 0:19:00.159 is buying and holding good products. Yeah, if you can 0:19:00.359 --> 0:19:02.320 do that and withstand the temptation to trade a lot, 0:19:02.440 --> 0:19:05.639 you'll do great. And that it's hard though, and this 0:19:05.840 --> 0:19:09.199 is one of the criticism, especially from Vanguard's founder John Bogel. 0:19:10.040 --> 0:19:12.280 He thinks e t f s trade a lot, and 0:19:12.359 --> 0:19:14.719 therefore people are doing the wrong thing, which is trading, 0:19:14.800 --> 0:19:17.920 and he's not wrong. He's not wrong. But there's also 0:19:18.119 --> 0:19:19.680 a lot of buying and holding going on in e 0:19:19.760 --> 0:19:22.440 t f s. So again, if you can withstand the 0:19:22.480 --> 0:19:25.399 temptation to trade, and you can buy and hold. You 0:19:25.480 --> 0:19:28.320 can benefit from the low cost, the lack of capital 0:19:28.359 --> 0:19:31.000 gains which is good, and the diversification, so you get 0:19:31.040 --> 0:19:33.359 all the benefits if you can just sort of, you know, 0:19:33.520 --> 0:19:38.480 hold back from trading a lot. So Eric, it's time 0:19:38.560 --> 0:19:41.880 for me to escape from your E. T. F fun 0:19:42.000 --> 0:19:47.960 house and headed towards the door. As I'm heading to 0:19:48.080 --> 0:19:53.040 the door, you're picturing me in a clown outfit, absolutely 0:19:53.119 --> 0:19:59.360 picturing Thanks for coming. Did you enjoy your time? Anyways, 0:19:59.400 --> 0:20:02.639 you're you're leaving. My my, why did I come here 0:20:02.680 --> 0:20:06.400 in the first place? Because this is again we're gonna 0:20:06.520 --> 0:20:09.480