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ETF Store Show Recap – 11/26/11

Nate Geraci November 28, 2011

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, the President & CEO of the Missouri Council on Economic Education, Mike English, joined us in the studio to discuss the importance of financial education within our communities.  The Missouri Council on Economic Education is a nonprofit organization that focuses on educating teachers in economics and finance so that they may better promote financial literacy to their students.  At The ETF Store, we’ve always made it a priority to ensure that our clients are educated on how we’re investing their money and that they understand the importance of critical factors such as investment costs, taxes and asset allocation.  However, we also believe strongly in educating non-clients and simply being a resource for the community to help people better understand how to deal with various personal financial matters.  To that end, we’ve partnered with the Missouri Council on Economic Education to help them in their cause of promoting financial literacy within our communities.

It has always struck a chord with us that schools require students to learn about subjects like Greek mythology or foreign languages, but they don’t require classes in personal finance and economics to teach kids the basics on things like balancing a checkbook or understanding the basics of investing.  With the recent financial crisis, it seems highly likely that this lack of personal financial education was a major factor in what happened with the housing collapse.  People were buying houses they couldn’t afford with exotic mortgages they didn’t understand.  People just assumed that house prices always go up and they really didn’t have a good grasp of their own personal balance sheets.  The fact that so many people were doing things financially that just made no sense whatsoever should really open people’s eyes up to the fact that we have a major problem in this country with financial literacy.

Mike English provided some interesting perspectives on this problem, the challenges we face in educating our youths, and how you can help.  Learn more about the Missouri Council on Economic Education by visiting http://cas.umkc.edu/mcee/.

Listen to the full show here.

ETF Store Show Recap – 11/19/11

Nate Geraci November 20, 2011

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 show, we delved into a number of ETFs including MUB, SPLV, SLV, and PCY.  We also discussed what’s driving the various financial markets right now including the recent mixed US economic data and the latest on the European Debt Crisis.

And, as we approach the end of the year, we explained why you may want to consider getting rid of your mutual funds and switching to ETFs to avoid taxable capital gain distributions.  ishares, the largest ETF provider, recently announced that 231 of its 233 ETFs (99%) are not expected to pay capital gain distributions this year.

Listen to the full show here.

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Have ETFs Killed the Mutual Fund “Rock Star” Managers?

Nate Geraci November 17, 2011

CNBC.com published an interesting article this week on Legg Mason’s Bill Miller, who announced he was stepping down as the manager of Legg Mason’s flagship Value Fund.  Miller was one of the last of a dying breed of high profile, “rock star” mutual fund managers trying to beat their benchmark indexes each year.  Unfortunately, Miller’s unlikely run of outperformance came to an end in 2006 and Miller has struggled mightily since that time.  A recent article from Reuters titled “Miller’s Fall Shows Luck at Play in Investing” had some interesting comments from the President of Fund Research at Morningstar, Don Phillips, who said that Miller himself “always acknowledged what a difficult competitor the S&P 500 is” and that “even when he was getting all the praise, he (Miller) was very skeptical”.

California Institute of Technology professor Bradford Cornell continued with “most of the annual variation in performance is due to luck, not skill.  Annual rankings of fund performance provide almost no information regarding management skill”.

It makes sense, then, that investors are continuing to gravitate in huge numbers towards passively managed ETFs, where investors can capture the benchmark returns at a fraction of the cost charged by overpriced actively managed mutual funds.  Investors are realizing that it’s more important to pick the right asset classes than trying to pick the right individual stocks or bonds.  And what better way to pick the right asset classes than with ETFs?

As Phil Pearlman, executive editor of StockTwits, commented in the CNBC.com article, “Mutual funds remind me of AOL dial-up:  a dwindling collection of old people who don’t know better, contributing monthly to a comically inferior product and Miller was the symbol figurehead of this beta minus fees charade”.

It looks like the charade is up and Miller is smart enough to recognize that.  ETFs are quietly killing the actively managed mutual fund industry and “rock star” mutual fund managers are becoming a relic of the past.

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