ETF Prime Archive

The ETF Store, Inc. Expands Weekly Radio Show

“The ETF Store Show” moving to hour-long format and will now air on ESPN 1510 AM Tuesdays at 9am.

The ETF Store, Inc., nationally recognized as the first investment advisor to offer only Exchange Traded Funds (ETFs), is expanding their weekly radio program.  “The ETF Store Show”, the first radio program dedicated to investing in ETFs, is moving to an hour-long format and will now air Tuesdays at 9am on ESPN 1510 AM.  Hosted by The ETF Store’s Nathan Geraci and featuring a variety of ETF industry experts, “The ETF Store Show” helps investors better understand the benefits of investing in Exchange Traded Funds and provides actionable ETF investment ideas.

“The ETF Store Show” launched in August of 2011 and has quickly developed a loyal following among ETF investors.  Geraci commented, “With the tremendous reception we received from our half-hour program and the growing investor demand for quality information on Exchange Traded Funds, the partnership with ESPN 1510 makes sense.  We’re excited at the opportunity to provide more information to investors in this rapidly growing area of investing and we hope to continue bringing more awareness to investors on how ETFs can help them lower their investment costs, reduce their taxes, and increase the diversification of their portfolios”.

ETFs now have well over $1 trillion in assets and have been called the next generation mutual fund. Compared to actively managed mutual funds, ETFs are typically less expensive, more tax efficient, and offer greater flexibility and transparency to investors. ETFs also allow individuals to invest in asset classes that were previously unavailable or difficult to access for retail investors.

About The ETF Store

The ETF Store is a Kansas City based fee-only independent investment advisor that uses exchange traded funds to provide disciplined, risk focused investment solutions. By primarily investing in Exchange Traded Funds, the solutions are able to take advantage of the cost savings and liquidity of ETFs to efficiently invest in a wide number of asset classes and financial markets.  For more information, visit www.etfstore.com.

Facebook IPO Brings Retail Investor Challenges to Light

The Facebook IPO on May 18^th was highly anticipated and unique.  However, the amount of attention generated by this IPO also brought unwelcomed scrutiny, particularly for the large Wall Street firms that some investors have long felt “gamed” the system against them.  Morgan Stanley, the lead underwriter for the Facebook IPO, is already feeling the brunt of media criticism for its handling of the Facebook IPO.  More importantly, the entire Facebook IPO process has brought to light the many challenges retail investors face in trying to compete against Wall Street’s big investment firms.

Typically, the lead underwriter for an IPO doubles as a cheerleader for the company they’re taking public, complete with overly optimistic earnings forecasts to drive demand.  This is one of the ways they provide “value” and justify their substantial underwriting fees.  In addition, the underwriter will typically make the offering available through their own brokers (who can be quite pushy touting the stock) and even other discount brokerages.  For the Facebook IPO, the resulting investor demand from all of these actions raised the IPO price from the original $28-$35/share range to a lofty $38/share price.  Quite simply, they convinced enough individuals (vs. institutional investors) to buy the IPO so that they could raise the price.

In addition to being a cheerleader for the stock, the underwriter may also play the role of defending (i.e. propping-up) the share price on the day of the IPO.  In Morgan Stanley’s case, they did everything they could to keep the share price above the $38/share IPO price on the first day of trading.  The firm’s traders bought an estimated 30 to 40 million shares at $38/share trying to create a price floor.  Remember, Morgan Stanley has a reputation to uphold (and many more lucrative IPO clients to sell).  The mispricing of an IPO isn’t a bullet point they want on their next sales presentation.  As a side note, the fact that Morgan Stanley could successfully defend the $38/share IPO price doesn’t give a real warm and fuzzy feeling to those individual investors who already feel that the market is manipulated.

Lastly, and possibly most disturbing, is that at the same time Facebook was conducting their investor roadshow to drive demand for their IPO, Morgan Stanley’s own analysts (along with JP Morgan and Goldman Sachs) were cutting revenue forecasts for Facebook.   These lower projections may have only been selectively shared with hedge funds and other institutional investors (who shorted the stock on the first day).  And keep in mind that Morgan Stanley’s own brokers were pushing the stock to their retail clients at the same time they were cutting revenue forecasts.

The moral of this story is that individual investors need to be aware of the stacked deck they are playing against.  As we’ve said many times before, investors must exercise extreme caution when dealing with these larger financial firms and brokers who seem more concerned about their own financial future than yours.  Don’t become Wall Street’s Muppet!  At The ETF Store, we are an independent investment advisor who does not make commissions by pushing stocks like Facebook and we operate as a fiduciary that places our clients’ interests ahead of our own – which is the way it should be.  Additionally, rather than try to combat the big banks and institutional investors on IPOs, our strategy is to focus on building low cost, broad based, highly diversified portfolios for our clients.

To learn more about how to invest with The ETF Store, contact us here and one of our knowledgeable, friendly advisors will contact you at your convenience.

What Facebook’s IPO and JP Morgan’s Trading Error have to do with ETFs

Listen to The ETF Store Show every Saturday at 4pm on KCMO Talk Radio 710AM as we cover everything you need to know about Exchange Traded Funds and the world of investing.

On our most recent radio broadcast, we discussed a number of key headline events currently permeating the financial markets, including the much anticipated Facebook IPO and JP Morgan’s massive trading error.  Investors in both of these companies have rudely found out, if they weren’t already aware, that investing in individual stocks (and especially IPOs) can pose significant challenges.   As regular listeners of our radio program know, we talk all the time about the inherent riskiness involved in trying to select individual stocks.  There are just too many factors, many of which may be unknown to investors (see Morgan Stanley’s lack of disclosure regarding Facebook’s revenue estimates), which can derail what seem to be good stock picks.  That’s not to mention that individual investors are trying to compete against Harvard MBAs working 80 hours a week on Wall Street with direct access to the CEOs and CFOs of the companies they’re trying to invest in.  Add in the fact that from 1989 – 2008, 21% of all stocks listed in US markets became bankrupt and you’re looking at a recipe for underperformance.  Simply put, statistically, you’re much better off investing in low cost, passively managed investments such as equity ETFs than trying to select individual stocks.

All that being said, we realize that there are some investors who are determined to bet on companies like Facebook and JP Morgan.  So we’d be remiss if we didn’t mention that there are ETFs that will allow investors to gain exposure to both of these companies without putting all of their eggs in one basket.  If you must invest in Facebook or JP Morgan, listen to our full show here to learn more about which ETFs you can look at to gain exposure.  You can also listen to our most recent weekly market update.

Podcast: Play in new window | Download