ETF Radio Show

ETF Store Show Recap – 9/10/11

Listen to The ETF Store Show every Saturday at 3pm on KCMO Talk Radio 710AM as we cover everything you need to know about Exchange Traded Funds and the world of investing.

Think your advisor is Nostradamus and can pick the stocks or actively managed mutual funds that outperform the broader market in any given year?  You may want to reconsider that.  On our most recent radio broadcast, we answered this and several other common, day-to-day questions we receive from individuals regarding Exchange Traded Funds and The ETF Store.

A common refrain we hear from individuals is that their advisor has told them they’re accepting mediocre returns by investing in ETFs since ETFs are passively managed, indexed investments.  These same advisors believe trying to pick individual stocks and actively managed mutual funds is a better path to financial success for their clients.  Consider the following:

• Dalbar, a mutual fund research firm, found that over the 20-year period ending December 31, 2010, the average mutual fund investor achieved an annual return of 3.8% compared to 9.1% for the S&P 500 index!
• Researchers at Dimensional Fund Advisors found that from 1980 to 2008, 25% of stocks were responsible for all of the gains in the broad market.  75% of the stocks over this time generated annual losses of 2%!

On our radio show, we delved into these and several other mind blowing stats regarding actively managed mutual funds and individual stock selection and explained why your advisor may want to consider starting a hedge fund if they think they can consistently find outperformance via these investment vehicles.

We also covered a wide range of topics including explaining the importance of independent custodians, whether it is expensive working with an investment advisor, some high dividend yielding ETFs to consider, how tactical asset allocation reduces risk, and everyone’s favorite subject these days – gold.

Listen to the full show here.

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A Rare Look Inside the SPDR Gold Trust Vault

As gold surges to new record highs and the popularity of physically backed gold ETFs continues to grow, CNBC’s Bob Pisani brings us a fascinating look inside the London vault where the gold backing the world’s largest ETF is held.  Conspiracy theorists have claimed that the most popular gold ETF, the SPDR Gold Trust (GLD), doesn’t actually own or hold physical gold.  Hopefully, Mr. Pisani’s journey inside the GLD vault will alleviate any concerns investors may have and conspiracy theorists can focus their attention on something with a little more substance.

ETF Investors Wealthier and Better Educated Than Mutual Fund Investors?

A recent article in Investment News highlighted some interesting research conducted by Cerulli Associates Inc – namely, that compared to mutual fund investors, ETF investors tend to be wealthier, younger and better educated.  Some interesting data points from the article include:

• The median household income for mutual fund investors is $80,000 vs. $130,000 for ETF investors.
• The median household financial assets for mutual fund investors are $200,000 vs. $300,000 for ETF investors.
• Finally, the median age of the head of the household is 50 for mutual fund investors vs. 46 for ETF investors.

As Christian Magoon, an industry consultant, points out in the article, “You could think of ETFs as digital music, in terms of the way they represent the emerging and disruptive technology”.

Frankly, this research comes as no surprise to us at The ETF Store.  We’ve seen a clear shift in the attitudes of investors as they seek lower cost, more transparent, and tax efficient ways to build highly diversified portfolios – a shift towards ETFs.  As with any emerging product or technology, the early adopters tend to be younger, wealthier, and more sophisticated.  The early adopters have the wherewithal to conduct due diligence on new products and technology to determine whether or not they are fit to compete in the marketplace.  Once a new product or technology has been properly vetted, the baton is passed from the early adopters to the mainstream.  And judging by the flow of funds to ETFs and away from mutual funds, the early adopters like what they see and we’re now watching the baton being passed to the mainstream.