WEBVTT - Under the Hood 0:00:06.320 --> 0:00:09.480 Welcome to Trillions. I'm Joel Weber and I'm Eric Beltnis. 0:00:09.760 --> 0:00:12.160 So in this episode, we're gonna spend some time talking 0:00:12.200 --> 0:00:15.160 about what happens when you're ready to put some money 0:00:15.200 --> 0:00:18.239 into an ETF busting out this wallet, tons of big 0:00:18.239 --> 0:00:20.600 bills in it. Okay, I'm ready to put it somewhere. Right, 0:00:20.800 --> 0:00:23.400 what should I be looking at before I make that decision? 0:00:23.600 --> 0:00:26.000 You'd have a checklist for picking any high end item, right, 0:00:26.000 --> 0:00:28.920 and this is no different. There's certain criteria due diligence, 0:00:28.960 --> 0:00:30.760 things you should look for, some of the more important 0:00:30.760 --> 0:00:32.479 than others. But there are many things you can do 0:00:32.560 --> 0:00:34.840 and it's not that hard. But some of the terms 0:00:34.880 --> 0:00:36.920 in E t F DI diligence can be a little frightening, 0:00:36.920 --> 0:00:39.200 a little jargon E. But we have the perfect guy 0:00:39.240 --> 0:00:42.159 here today to help simplify all that. He works for 0:00:42.200 --> 0:00:44.600 the c f r A. His name is Todd Rosenbluth, 0:00:45.000 --> 0:00:48.240 and he's sort of exactly who you are. He's a 0:00:48.360 --> 0:00:50.959 mutual fund and E t F analyst. Yeah, I mean 0:00:51.000 --> 0:00:53.600 he's kind of like me in another world. He works 0:00:53.600 --> 0:00:55.440 at his company. I work at my work competition, but 0:00:55.440 --> 0:00:58.880 we're also Piers. Todd writes really great stuff. I enjoy it. 0:00:58.960 --> 0:01:01.520 I also up push back on it. Sometimes we've had 0:01:01.560 --> 0:01:03.880 some friendly debates. I see Todd all the time on 0:01:03.880 --> 0:01:06.880 the circuit circuit. That's the thing. That's the thing. I 0:01:06.920 --> 0:01:09.320 know that sounds funny, but like there's conferences. You see 0:01:09.319 --> 0:01:12.600 Todd on panels and likewise. So he's the perfect guy 0:01:12.720 --> 0:01:15.720 to help simplify this because that's all he does. And 0:01:15.760 --> 0:01:17.960 I like that he is have a mutual fun background 0:01:18.040 --> 0:01:20.360 because E t F analyists who know the mutual fund 0:01:20.400 --> 0:01:22.760 really well tend to have a richer look at the 0:01:22.760 --> 0:01:25.280 E t F structure. So we're gonna talk about due diligence, 0:01:25.440 --> 0:01:28.520 which let's come up with a better title. How about 0:01:28.640 --> 0:01:30.600 under the hood. It's cliche, but I think in this 0:01:30.640 --> 0:01:32.800 case this is the perfect metaphor. We will go from 0:01:32.840 --> 0:01:36.200 the food store to the car. Right, we got our groceries. 0:01:36.200 --> 0:01:42.679 Now we're in the car. This week's episode. Okay, Todd 0:01:42.880 --> 0:01:46.600 Rosen Blues, thanks for joining us. Good to be here. Thanks, So, Todd, 0:01:46.840 --> 0:01:50.800 who are you? I'm in New York? Go totally? Do 0:01:51.000 --> 0:01:53.560 you want to get So? I head up the E 0:01:53.680 --> 0:01:55.840 t F and mutual fund research for a company called 0:01:55.880 --> 0:01:57.920 c f R A and it's literally called c f 0:01:58.000 --> 0:01:59.880 r A. It is literally called t f A so 0:02:00.120 --> 0:02:01.960 used to the business used to be owned by ms C. 0:02:02.120 --> 0:02:05.000 I uh the name c f A came out with it. 0:02:05.280 --> 0:02:07.920 I'm a former employee of S and P. I ran 0:02:08.440 --> 0:02:10.840 the mutual fund and et F research at c f A. 0:02:10.880 --> 0:02:14.040 I'm a former equity analyst that covered tech and telecom stocks, 0:02:14.080 --> 0:02:17.040 and before that was a mutual fund analyst at the 0:02:17.040 --> 0:02:19.800 company and at Value Line, and for the last seven 0:02:19.880 --> 0:02:22.160 years have been dedicated specifically to E t F s 0:02:22.200 --> 0:02:25.600 and to mutual funds and providing analysis for our n 0:02:25.720 --> 0:02:29.160 clients and and the general public in a range of ETF. So, 0:02:29.200 --> 0:02:32.320 tell me what your day looks like then, So a 0:02:32.320 --> 0:02:34.799 couple of things that are primarily day today. So I'm 0:02:34.800 --> 0:02:36.880 looking at trends that are going on in the marketplace, 0:02:36.919 --> 0:02:40.440 looking at investment ideas, and then trying to explain how 0:02:40.520 --> 0:02:43.680 you can participate in those investment ideas using either an 0:02:43.720 --> 0:02:47.079 E t F and or a mutual fund. Is part 0:02:47.080 --> 0:02:48.640 of what I do. So I typically write about two 0:02:48.720 --> 0:02:51.480 or three articles on a weekly basis that could publish 0:02:51.480 --> 0:02:54.960 for our clients. I'm dealing with reporters, including from Bloomberg 0:02:55.000 --> 0:02:56.840 that are working on their own stories and adding an 0:02:56.919 --> 0:03:00.240 input an independent perspective in that regard. And then we 0:03:00.280 --> 0:03:04.040 have clients so that are subscribing and advisors and retail 0:03:04.080 --> 0:03:06.799 clients that have access to our research and that want 0:03:06.840 --> 0:03:09.160 to hear more or have questions beyond what that is, 0:03:09.440 --> 0:03:11.560 or that possibly want to learn about us before they 0:03:11.600 --> 0:03:13.959 sign up. And then I'm part of those conversations as well. 0:03:14.040 --> 0:03:17.320 You said the word independent. Yes, c f r A 0:03:17.520 --> 0:03:21.320 doesn't offer their own mutual funds or e t F. 0:03:21.520 --> 0:03:24.320 C f R A doesn't have investment banking relationships the 0:03:24.360 --> 0:03:27.919 way that you're Morgan Stanley or Goldman Sachs does. That 0:03:28.200 --> 0:03:32.200 offers research on investment ideas were purely the best ideas 0:03:32.360 --> 0:03:35.480 and from an et F perspective, which is relevant for 0:03:35.480 --> 0:03:37.560 this topic. We have an equal number of e t 0:03:37.720 --> 0:03:39.640 F that we like as a number of e t 0:03:39.760 --> 0:03:41.600 F s that we don't like, So we we cover 0:03:41.680 --> 0:03:44.800 the whole universe. We have about t fs that we 0:03:44.840 --> 0:03:48.800 have an opinion on and roughly in one side of 0:03:48.840 --> 0:03:51.400 the bucket, roughly on the other side, you're not going 0:03:51.480 --> 0:03:54.320 to find that from others that are covering ets often 0:03:54.360 --> 0:03:56.440 want to just tell you what's a good idea. So 0:03:56.520 --> 0:03:58.400 I get Todd's emails, and that's one of the reasons 0:03:58.440 --> 0:03:59.880 I thought he would be a great guest as be 0:04:00.000 --> 0:04:04.000 because Todd is unique from your average et F person 0:04:04.080 --> 0:04:06.720 because a lot of times they get pretty much all 0:04:06.800 --> 0:04:09.120 in on e t F. It's like kool aid city. 0:04:09.320 --> 0:04:12.160 Todd still recommends mutual funds, and he has a reason 0:04:12.200 --> 0:04:14.360 for doing it. He also has a background of mutual 0:04:14.400 --> 0:04:17.480 funds and equities. You can put that together. It makes 0:04:17.480 --> 0:04:19.520 your et F analysis, I think, richer and deeper, and 0:04:19.560 --> 0:04:21.240 I think that's what makes Todd kind of unique. So 0:04:21.279 --> 0:04:24.200 how did you find the e t F? Todd? So 0:04:24.240 --> 0:04:26.400 my company, when I was at S and P, we 0:04:26.400 --> 0:04:29.479 were covering individual stocks. We were seeing the trend that 0:04:29.560 --> 0:04:33.160 investors were looking to invest in e t F s, 0:04:33.880 --> 0:04:36.320 and we wanted to come out in a different perspective. 0:04:36.400 --> 0:04:38.000 So the way that we look at in the way 0:04:38.040 --> 0:04:40.200 we did back now almost ten years ago and we 0:04:40.240 --> 0:04:42.600 continue to do so, is to us and E t 0:04:42.720 --> 0:04:45.240 F is a basket of securities. Whether it's a stock 0:04:45.320 --> 0:04:48.719 ETF it holds Apple and IBM and Facebook and what 0:04:48.800 --> 0:04:51.839 have you. If it holds individual bonds, then you should 0:04:51.839 --> 0:04:54.120 do that as well. So we come at this from 0:04:54.160 --> 0:04:56.960 a perspective that we cover individual stocks. We have by 0:04:57.040 --> 0:05:00.800 hold cell recommendations on individual stocks, and what is going 0:05:00.839 --> 0:05:03.160 to drive an E t F forward is going to 0:05:03.279 --> 0:05:05.920 be what's inside that portfolio. Now, there's other things that 0:05:05.960 --> 0:05:08.080 we use in our research, but so we just really 0:05:08.120 --> 0:05:11.360 took the underlying holdings and formed took the E t 0:05:11.480 --> 0:05:14.080 F rapper and decided to do things that were connected 0:05:14.120 --> 0:05:16.120 to it. Now at the risk of the commercial part 0:05:16.120 --> 0:05:18.760 of it, we use other things that are outside of 0:05:18.839 --> 0:05:21.040 holdings analysis, and I know we'll get into it from 0:05:21.040 --> 0:05:22.720 a due diligence perspective, but there are things that are 0:05:22.760 --> 0:05:25.240 unique to an e t F. It trades on an exchange, 0:05:25.320 --> 0:05:28.360 so there's bid esque spread analysis, you can do it's trades, 0:05:28.400 --> 0:05:30.840 and you can do technical analysis and the rest of 0:05:30.880 --> 0:05:32.880 getting too far in the weeds here, there's things you 0:05:32.880 --> 0:05:34.440 can do that are unique to an e t F 0:05:34.520 --> 0:05:37.159 then you would a mutual fund or an individual stock. 0:05:37.839 --> 0:05:41.360 What was your lightbulb moment that you realized, boy, these 0:05:41.360 --> 0:05:45.080 things are for real. Yeah, well it's you started seeing 0:05:45.080 --> 0:05:47.520 people buying them because it was the way to get 0:05:47.520 --> 0:05:50.679 exposure to a certain trend. So I even remember back 0:05:50.720 --> 0:05:52.640 when I was not an e t F analyst. But 0:05:52.640 --> 0:05:56.000 I remember people before we had to tech boom the 0:05:56.040 --> 0:05:59.880 Triple ques. The power shares product which actually just go 0:06:00.040 --> 0:06:02.960 was by Triple Q. Still, that's how common that name 0:06:03.000 --> 0:06:06.040 has become, which is a NASDAC one. It's the largest 0:06:06.040 --> 0:06:08.719 stocks non financial within a n Aztec. Side of what 0:06:08.760 --> 0:06:11.000 it is, people were buying that, I don't think they 0:06:11.080 --> 0:06:13.120 understood what it wasn't. In fact, I think people still 0:06:13.120 --> 0:06:15.280 think of it as only a tech reality thing. And 0:06:15.360 --> 0:06:17.800 so I just started digging into this, understanding more of 0:06:17.839 --> 0:06:19.440 what it was. And then when S and P got 0:06:19.440 --> 0:06:22.839 back around to looking into this, I was very happy 0:06:22.880 --> 0:06:24.760 to be able to do that because I had that 0:06:24.800 --> 0:06:28.919 background having been a former mutual fund analyst. So before 0:06:28.960 --> 0:06:30.600 you were an E t F analyst, you were a 0:06:30.680 --> 0:06:34.080 mutual fund analyst. So tell me about how you view 0:06:34.400 --> 0:06:37.920 a mutual fund versus in et F. What's that difference like? Yeah, 0:06:38.000 --> 0:06:39.960 So we cover both of them. I head up the 0:06:39.960 --> 0:06:42.000 research for both our E t F business and our 0:06:42.080 --> 0:06:45.360 mutual fund business. We have separate ratings on e t 0:06:45.520 --> 0:06:47.880 F s then mutual funds. There's others that are combining 0:06:47.920 --> 0:06:51.000 that together. We think there's a role for both in 0:06:51.080 --> 0:06:53.440 et F and or a mutual fund in the portfolio, 0:06:53.520 --> 0:06:56.840 whether it's actively managed or not so passively managed and 0:06:56.920 --> 0:07:00.279 index based, but the things that you need to focus 0:07:00.279 --> 0:07:03.720 on are different. So we don't believe the past performance 0:07:03.800 --> 0:07:05.599 of an e t F is going to give you 0:07:05.720 --> 0:07:07.600 much insight as to where is it going to go 0:07:08.320 --> 0:07:11.000 uh in the future. So there's no there's no disrespect 0:07:11.000 --> 0:07:14.040 to anybody who's running an e t F portfolio or 0:07:14.080 --> 0:07:16.800 running an e t F itself that's tracking the SMP 0:07:16.880 --> 0:07:19.360 five index or the m s c I e F 0:07:19.440 --> 0:07:22.560 index or what have you. But their job is to 0:07:22.640 --> 0:07:24.800 track that index, and they're pretty good at probably doing that. 0:07:24.840 --> 0:07:27.440 But there isn't the same skill set in picking stocks, 0:07:27.480 --> 0:07:30.280 buying a new when things are falling in value, or 0:07:30.320 --> 0:07:33.920 spotting new trends in that regard. So whereas we use 0:07:34.000 --> 0:07:37.480 a performance track record in mutual fund research at c 0:07:37.680 --> 0:07:40.600 f A, we don't really on that for our e 0:07:40.720 --> 0:07:42.920 t F research. The SMP five hundred is going to 0:07:43.000 --> 0:07:46.720 be up roughly this year, it's unlikely to do that 0:07:46.800 --> 0:07:49.960 in two thousand and eighteen, and and whether or not 0:07:50.080 --> 0:07:52.640 it did well this year really should have no bearing 0:07:52.640 --> 0:07:54.840 on how well it did going forward. People aren't buying 0:07:55.240 --> 0:07:57.040 e t s that way anymore, and we don't do 0:07:57.120 --> 0:07:58.720 research there. One the thing I do you want to 0:07:58.720 --> 0:08:01.160 talk about here is sort of what an e T 0:08:01.320 --> 0:08:04.160 F does, right, because it tracks an index, right, so 0:08:04.400 --> 0:08:07.720 when you're evaluating them, can you talk about how you 0:08:07.760 --> 0:08:10.960 look at that index? Right? So what we're doing in 0:08:11.040 --> 0:08:14.040 part is less looking at the index itself and the 0:08:14.120 --> 0:08:16.960 name of the index and the rules of the index, 0:08:16.960 --> 0:08:19.560 although I think that's extremely important for an investor to do. 0:08:19.960 --> 0:08:23.160 We're looking at what is currently inside the portfolio, what 0:08:23.280 --> 0:08:26.080 fit that criteria that was there? You're you're correct, It's 0:08:26.280 --> 0:08:30.560 very transparent. You can understand what's inside that portfolio. And 0:08:30.600 --> 0:08:33.480 if it's a market cap weighted the largest companies tend 0:08:33.520 --> 0:08:36.120 to have the highest exposure, which is in you know, 0:08:36.160 --> 0:08:38.199 I keep using the I shares SMP five hundred of 0:08:38.200 --> 0:08:41.559 the Vanguard five hundred product or the Spider five hundred products. 0:08:41.559 --> 0:08:45.240 So I give everybody that's in their full color independent analysts. 0:08:45.240 --> 0:08:47.560 So that's how that's where it comes about independent analyst 0:08:47.600 --> 0:08:52.240 where about uh for what that is? Then then the 0:08:52.320 --> 0:08:54.280 largest companies, the apples, the ibm s are going to 0:08:54.400 --> 0:08:57.480 dominate that and and our opinion of those stocks is 0:08:57.520 --> 0:09:00.120 gonna matter more? To use the SMP five hundred as 0:09:00.120 --> 0:09:03.040 the example. There's an equal weighted product that's out there 0:09:03.040 --> 0:09:07.080 from Guggenheim. RSP is a ticker same exact companies, but 0:09:07.120 --> 0:09:11.360 they treat every stock equally. There's more MidCap exposure than 0:09:11.440 --> 0:09:16.400 you'd find versus the other SPI index products. We're gonna 0:09:16.400 --> 0:09:19.120 offer take not whether it is equal waiting better than 0:09:19.280 --> 0:09:21.720 a market cap waiting approach, but is now a better 0:09:21.760 --> 0:09:25.920 time to be in those companies across the SNP five 0:09:26.360 --> 0:09:30.800 index as opposed to being dominated by those mega cab companies, 0:09:30.840 --> 0:09:33.280 the behemoths that are that have earned their their stripes. 0:09:33.440 --> 0:09:35.880 This brings up a big point, which is who is 0:09:35.920 --> 0:09:38.160 the user and what is their goal? And and my 0:09:38.320 --> 0:09:41.280 work I have that is a big difficulty because on 0:09:41.360 --> 0:09:44.920 the terminal we have mostly institutions, but there's some advisors 0:09:44.960 --> 0:09:47.040 and I don't know if they're looking to make a 0:09:47.080 --> 0:09:49.520 quick buck over a week or they want to go 0:09:49.520 --> 0:09:50.920 in for the long haul. I think, you know, there 0:09:50.960 --> 0:09:52.720 are different and that's the thing with et s. Everyone 0:09:52.800 --> 0:09:55.360 uses them so in terms of like if it's a 0:09:55.360 --> 0:09:57.959 good time or not. I think there's a challenge with 0:09:58.360 --> 0:10:00.959 what is the investor, how big are they, how concerned 0:10:00.960 --> 0:10:03.200 are they about certain areas of the e t F, 0:10:03.400 --> 0:10:06.960 and what's their holding period? How do you determine who 0:10:07.000 --> 0:10:09.479 the investor is and what their goal is when recommending 0:10:09.480 --> 0:10:12.080 an e t F. Yes, so we're trying to offer 0:10:12.240 --> 0:10:15.920 one opinion on an e t F, not multiple opinions 0:10:15.920 --> 0:10:17.640 that are out there to trying to target to the 0:10:17.640 --> 0:10:20.439 audience for what it is. And and I understand where 0:10:20.440 --> 0:10:23.680 you're coming from in that regard. But that institutional investor 0:10:23.800 --> 0:10:27.440 that then is on their own running, you know, money 0:10:27.440 --> 0:10:29.920 for their own, you know, doing something for their parents, 0:10:31.240 --> 0:10:33.360 would want to buy the should buy the same et 0:10:33.520 --> 0:10:36.280 F for the same reasons, necessarily because it's a good 0:10:36.280 --> 0:10:38.760 et F that fits their approach. So we have three 0:10:38.760 --> 0:10:41.079 different ways that we look at costs, and one of 0:10:41.120 --> 0:10:43.720 them is the expense ratio. One of them is the 0:10:43.760 --> 0:10:45.719 bid ask spread. I'm gonna leave the third one out 0:10:45.760 --> 0:10:47.440 for the moment for what it is. If you are 0:10:47.640 --> 0:10:50.840 more of a buy and hold individual investor or a 0:10:50.880 --> 0:10:54.400 buy and hold institutional investor, then that expense ratio is 0:10:54.400 --> 0:10:58.000 gonna matter more. If you're a more frequent trader, whether again, 0:10:58.000 --> 0:11:01.440 whether you're an institutional investor, or you've a brokerage account 0:11:01.440 --> 0:11:07.280 where it's unlimited trading or what per trade, and some 0:11:07.320 --> 0:11:09.640 of these things are commissioned free, then that bid ask 0:11:09.720 --> 0:11:12.840 spread is going to matter more because the trading costs 0:11:12.880 --> 0:11:15.240 are gonna add up. We use both of those they're 0:11:15.400 --> 0:11:18.280 roughly equally weighted from a cost perspective, and the way 0:11:18.280 --> 0:11:22.040 that we have a ranking of each et F, but 0:11:22.160 --> 0:11:23.960 we still think that you need to not only know that, 0:11:24.040 --> 0:11:25.920 and you need to know other things that are important. 0:11:25.920 --> 0:11:29.280 So the holdings, the how it's trading. From a technical perspective, 0:11:29.600 --> 0:11:33.360 is there liquidity that's tied to that portfolio as well? 0:11:34.040 --> 0:11:37.400 And if you can, you can screen so you can 0:11:37.480 --> 0:11:39.240 use our research the same way you could be able 0:11:39.280 --> 0:11:41.920 to use on the Bloomberg terminal, and you can say, well, 0:11:42.040 --> 0:11:44.400 we don't care about the bits spread. Then you can 0:11:44.559 --> 0:11:47.480 choose to it's still in the rating, but you can 0:11:47.520 --> 0:11:50.160 be able to filter and store based on certain characteristics 0:11:50.200 --> 0:11:54.360 that better fit your needs. So actually talk to me 0:11:54.400 --> 0:11:58.160 about what your work looks like. Yeah, so we there's 0:11:58.160 --> 0:12:01.000 two different ways that that people have access to or 0:12:01.160 --> 0:12:04.040 things that they subscribe to, either an individual or an 0:12:04.040 --> 0:12:07.680 advisor or an institutional investor that has access to our research. One, 0:12:07.800 --> 0:12:12.960 we have an opinion generated report on plus ETFs that count. 0:12:13.040 --> 0:12:16.040 I use plus because that number keeps changing. Uh. We 0:12:16.160 --> 0:12:19.560 typically cover an e t F about three months into 0:12:19.640 --> 0:12:22.520 its history. So what was there today and what is 0:12:22.559 --> 0:12:24.200 there in a couple of weeks. That number is going 0:12:24.240 --> 0:12:27.000 to change, and that opinion is going to say overweight 0:12:27.080 --> 0:12:29.160 if we like it. It's gonna say underweight if we 0:12:29.200 --> 0:12:31.160 don't like it, and it's gonna say market weight if 0:12:31.200 --> 0:12:32.880 we're neutral, And it's gonna show you what are the 0:12:33.000 --> 0:12:36.400 drivers of that ranking overall and what are the characteristics. 0:12:36.800 --> 0:12:39.040 The second thing, which Eric was kind enough to offer 0:12:39.280 --> 0:12:43.199 compliments on on the commentary, is I published content that 0:12:43.440 --> 0:12:46.200 is more long form in nature, more like an article 0:12:46.640 --> 0:12:50.600 that has a specific investment topic. Why we think now 0:12:50.720 --> 0:12:52.960 is a good time to either be favorable or unfavorable 0:12:53.000 --> 0:12:56.199 on that topic, and then talk about some of the 0:12:56.679 --> 0:12:59.520 e t f s or mutual funds as relevant that 0:12:59.640 --> 0:13:02.319 fit in to that trend with really trying to diagnose 0:13:02.840 --> 0:13:05.959 what are the differences in those products. So, if it's 0:13:05.960 --> 0:13:09.360 a technology focus, you know, what do we think of 0:13:09.600 --> 0:13:13.120 large cap technology versus something that offers more smaller companies 0:13:13.520 --> 0:13:17.079 inside that versus something that is more rigorous from a 0:13:17.120 --> 0:13:21.040 fundamental perspective, looking at certain characteristics like dividends, for example, 0:13:21.080 --> 0:13:23.839 and there's there's an e t F for that as well. 0:13:24.000 --> 0:13:25.920 There's ant for everything. There's an e t F for 0:13:26.000 --> 0:13:28.440 almost everything. If there wasn't, then we wouldn't see more 0:13:28.480 --> 0:13:31.040 white space. We wouldn't see you know how many How 0:13:31.080 --> 0:13:34.679 many ets have we launched this year? Over fifty and 0:13:34.720 --> 0:13:38.320 there's more in registration to come out in two thousand eighteen, 0:13:38.400 --> 0:13:41.280 so there's still some white space or equally as important. 0:13:41.320 --> 0:13:43.000 And again I think we'll probably get there from a 0:13:43.040 --> 0:13:45.439 due diligence aspect. There's two or three or four of 0:13:45.520 --> 0:13:48.679 these et fs that are closely aligned for a certain 0:13:48.720 --> 0:13:51.920 investment theme, which makes the choice harder. It makes it 0:13:52.160 --> 0:13:56.160 more fun for Eric and myself to offer commentary and security. Yes, 0:13:56.280 --> 0:13:59.160 the industry continues to grow and then and thankfully they 0:13:59.240 --> 0:14:01.400 need more. And even though more money is going into 0:14:01.480 --> 0:14:03.920 some of the cheaper products, people still want to buy 0:14:04.080 --> 0:14:08.079 some of these products tied to lithium for example, or cybersecurity, 0:14:08.160 --> 0:14:09.959 and you want to know what else? What do you 0:14:10.040 --> 0:14:12.679 think of that? And that's that's where hopefully cf A 0:14:12.760 --> 0:14:14.760 can come in. Yeah, we put a no doubt on 0:14:14.880 --> 0:14:17.160 buy back and buy back ETFs, which is when companies 0:14:17.200 --> 0:14:19.680 buy back their shares. And there's a couple of e 0:14:19.800 --> 0:14:21.760 t fs for that, not just one. And the guy 0:14:21.840 --> 0:14:24.680 who runs b I was he was shocked there was 0:14:24.720 --> 0:14:26.200 an e t F for buy back. So I'm like, yeah, 0:14:26.200 --> 0:14:28.440 it's like five years old. There's two of them, p kW, 0:14:29.480 --> 0:14:31.720 but then there's another buy back and the differences between 0:14:31.760 --> 0:14:34.440 the two of them are pretty drastic, the fee, the 0:14:34.520 --> 0:14:36.920 way they're weighted, everything, and so you have two different 0:14:36.960 --> 0:14:39.240 experiences even though they're both called the buy back ETF. 0:14:39.360 --> 0:14:41.760 And that's ultimately what you know. I think Todd and 0:14:41.800 --> 0:14:43.480 I share is trying to make sure you understand that. 0:14:43.560 --> 0:14:45.680 But I agree with them. When you look at the 0:14:45.760 --> 0:14:48.600 holdings and you look at the waitings, that's the engine 0:14:48.720 --> 0:14:50.520 that is the most important part of the car, or 0:14:50.560 --> 0:14:59.880 the e t F in this case is so let's 0:15:00.000 --> 0:15:02.960 actually talk about due diligence and how you approach that. 0:15:03.120 --> 0:15:05.840 So say I take an e t F off the shelf, 0:15:06.240 --> 0:15:09.240 what's the first thing I should do? So the first 0:15:09.280 --> 0:15:10.880 thing I think you should do is look at the 0:15:10.920 --> 0:15:13.080 holdings to go where Eric said, you should understand what 0:15:13.200 --> 0:15:16.880 it is that's inside that portfolio. I'm assuming that someone 0:15:16.920 --> 0:15:19.600 who's you know, you didn't just randomly walk into the 0:15:19.680 --> 0:15:23.000 store and not know which store you walked into. So 0:15:23.080 --> 0:15:24.800 if you chose a certain story, you went there for 0:15:24.840 --> 0:15:27.720 a certain purpose in mind, and so you didn't go 0:15:27.920 --> 0:15:31.920 into a department store and look for milk necessarily to 0:15:32.120 --> 0:15:33.960 open the hood and it's like, okay, what's in here? 0:15:34.200 --> 0:15:37.200 So and to try to understand how that fits into 0:15:37.400 --> 0:15:39.280 what lver else you own. And if this is the 0:15:39.360 --> 0:15:41.640 first et F that you're buying, then what you should 0:15:41.640 --> 0:15:46.000 be buying is something that's extremely diversified, diversified from if 0:15:46.040 --> 0:15:50.720 it's U, S, E. T F from various sectors, healthcare, technology, financials, 0:15:50.800 --> 0:15:52.840 what have you. But you should take a look at. 0:15:53.000 --> 0:15:55.960 So we do research on the entire portfolio, but the 0:15:56.040 --> 0:16:00.040 top ten holdings, which either are heavy waitings with in 0:16:00.080 --> 0:16:03.080 the portfolio or they're slightly heavy weightings. If it's something 0:16:03.160 --> 0:16:06.320 is more equally weighted, and those names should be something 0:16:06.400 --> 0:16:08.400 that you want to have within your portfolio. You know, 0:16:08.520 --> 0:16:11.360 we will offer research that will tell you what do 0:16:11.480 --> 0:16:12.880 we think of what that is. But even if you 0:16:12.920 --> 0:16:15.040 didn't want to use our research and you just want 0:16:15.080 --> 0:16:17.400 on went onto a fact sheet, or went onto a website, 0:16:17.480 --> 0:16:19.240 or you found an E t F ticker on the 0:16:19.360 --> 0:16:22.680 on the great Bloomberg terminal that's there. If you don't 0:16:22.760 --> 0:16:25.040 know what these companies are, and these are not companies 0:16:25.080 --> 0:16:27.960 that make sense to have in your portfolio, then this 0:16:28.000 --> 0:16:30.320 shouldn't be anything you should be doing any further digging on. 0:16:30.800 --> 0:16:33.120 I'll take this even further and I'll say I have 0:16:33.200 --> 0:16:35.320 a golden rule for picking E t F s, and 0:16:36.040 --> 0:16:38.400 it's thou shalt not pick an E t F based 0:16:38.440 --> 0:16:40.920 on the name. Yes. So I'll give you two examples 0:16:40.960 --> 0:16:43.360 real quick. The I shares China E t F. This 0:16:43.440 --> 0:16:45.000 is a famous one. Todd knows where I'm going with this. 0:16:45.120 --> 0:16:47.400 F x I. It's the most traded, came out first, 0:16:48.120 --> 0:16:50.240 but it's half financials and a lot of those are 0:16:50.240 --> 0:16:51.680 state own banks. You're not getting a lot of that 0:16:51.760 --> 0:16:53.840 tech in the tech surge that had China has, so 0:16:53.920 --> 0:16:58.240 f x I can lag the rest of China because 0:16:58.280 --> 0:17:00.640 it doesn't have that tech. Or another when the social 0:17:00.720 --> 0:17:03.200 media E t F. Right, that sounds pretty innocent, right, oh, 0:17:03.320 --> 0:17:06.639 social media Facebook? I like that a third of it 0:17:06.800 --> 0:17:09.399 is emerging markets. It's much more volatile and filled with 0:17:09.520 --> 0:17:11.720 companies that you may not even ever heard of. And 0:17:11.840 --> 0:17:14.960 so those are some examples. And there's Gold Funds that 0:17:15.080 --> 0:17:17.159 you think holds the goal but holds gold future. So 0:17:17.880 --> 0:17:20.080 the name sometimes works, but a lot of times it 0:17:20.480 --> 0:17:22.720 isn't what you think. So I'll offer another example there 0:17:22.720 --> 0:17:24.679 and then perhaps we're gonna stay in the weeds. Eric 0:17:24.720 --> 0:17:26.520 and I could probably do this going back and forth 0:17:26.560 --> 0:17:29.720 and tickers. So I used for full disclosure. Again, I 0:17:29.840 --> 0:17:32.520 used to work at SNP. I continue to use this 0:17:32.840 --> 0:17:35.080 E t F as an example. Beforehand, I'll give two 0:17:35.119 --> 0:17:38.040 of them. The Spider SNP home Builder E t F 0:17:38.680 --> 0:17:41.720 only has a third of its exposure in home builders. 0:17:42.119 --> 0:17:46.399 It has home furnishing companies, It has building product companies. 0:17:46.440 --> 0:17:49.920 These are all related to the housing marketplace. But and 0:17:50.080 --> 0:17:54.640 not surprisingly, this year, it's lagging behind. It's similarly named 0:17:54.680 --> 0:17:57.520 but yet different. I shares Home Construction E t F 0:17:58.080 --> 0:18:02.440 I t B. It's about half performance. So for the 0:18:02.680 --> 0:18:06.800 Spider product x HB about six for that I shares 0:18:06.880 --> 0:18:08.760 I t B product. Why is I shares I TV 0:18:08.920 --> 0:18:11.840 doing better? Well? It holds home builders, it has six 0:18:12.359 --> 0:18:14.720 waiting in a very strong performing area. The second one 0:18:14.760 --> 0:18:16.800 I like to do, and again I love the product. 0:18:16.840 --> 0:18:20.080 I really think that Wisdom Trees h E d J 0:18:20.400 --> 0:18:23.679 the Europe Hedge product, is an excellent product. It provides 0:18:23.720 --> 0:18:26.960 you amazing exposure to the Eurozone. But it doesn't have 0:18:27.119 --> 0:18:30.520 the word zone in its name. It only has exposure 0:18:30.520 --> 0:18:33.800 to Germany, France, Italy, Spain. It has no exposure to 0:18:33.800 --> 0:18:36.720 the United Kingdom, no exposure to Switzerland, two of the 0:18:36.920 --> 0:18:40.840 largest countries that are in Europe. We've seen the UK 0:18:41.160 --> 0:18:44.920 look to brexit. Well, it's already brexited. These Wisdom Tree 0:18:44.960 --> 0:18:46.880 e t F it's not there and it wasn't there, 0:18:46.920 --> 0:18:49.680 And if you're trying to invest in those countries, this 0:18:49.840 --> 0:18:51.560 isn't the e t F for you. It's a very 0:18:51.600 --> 0:18:53.359 good one, it's just not an e t F for 0:18:53.480 --> 0:18:55.720 you for that exposure. And I think of the home builders, 0:18:55.840 --> 0:18:58.320 I looked at this one a lot. That's probably the 0:18:58.400 --> 0:19:00.960 most stark difference. There could be a couple other in 0:19:01.040 --> 0:19:04.840 the same category, but they their average performance difference every 0:19:04.920 --> 0:19:07.159 year is about seven percent, so they're nowhere close. But 0:19:07.200 --> 0:19:09.120 I will say that they You could argue that names 0:19:09.160 --> 0:19:12.600 are actually okay because home construction is like I'm putting 0:19:12.720 --> 0:19:15.520 up the walls and the roof, and then I'm out 0:19:15.720 --> 0:19:17.720 right that's and then home Builders is like, oh, we're 0:19:17.720 --> 0:19:20.160