There has been a lot of talk over the past few years about how passive investing and the rise of exchange traded funds (ETFs) would be the next financial market bubble that would wreak havoc for investors. There hasn’t been a period of panic in financial markets similar to what occurred in 2008 to test the mettle of ETF products – that is, until the COVID-19 pandemic of 2020.
Tag: ETF
The Increased Liquidity of ETFs
In times of turbulence and uncertainty, liquidity is a prized possession in financial markets. One of the interesting features of the ETF vehicle is its ability to provide increased liquidity relative to the underlying positions they track. This article from David Nadig describes how when liquidity dries up in the bond market, ETFs are able…
ETFs Aren’t Always the Most Cost-Effective
Over the last few years there has been a lot of media attention on ETFs (exchange traded funds) and how they have precipitated a “fee war” in the asset management industry. Large asset managers like Vanguard and BlackRock have been accused of inciting a “race to the bottom” in investment management fees, squeezing margins for…
Can Concentrated Portfolios Compete with ETFs?
As low-cost indexing strategies – usually in the form of ETFs – have increased in popularity, we’ve frequently opined that one of the major changes for the investment industry will be the shrinking of investment funds that are providing “high-cost” beta. We would define high-cost beta as an investment fund that charges management fees over…
The Downsides to Zero-Cost Commission
This week, financial services firm Charles Schwab announced that they would be eliminating trading commissions for stocks, ETFs, and options listed on U.S. or Canadian exchanges for clients using mobile or web applications. Though the press release stated the motive was to lower barriers for investors, it was likely done in response to initiatives from…
How to Overcome Home Country Bias in Investing
Home country bias is when an investor has more of their portfolio allocated to financial securities domiciled in the country in which they reside than what global market value proportions would dictate. While home country bias is pervasive across the globe, Canadian investors are typically more prone to this phenomenon. Studies suggest anywhere between 50-60%…
Bursting The Passive Investing Bubble
This week Bloomberg put out an article focusing on Michael Burry’s criticisms of passive investing and how, in his opinion, it mimics the bubble in synthetic asset-backed collateralized debt obligations prior to the 2008 financial crisis. Burry, one of the protagonists in Michael Lewis’ book “The Big Short” who correctly called the financial market collapse…