Welcome to the ETF Prime Podcast

We Discuss Gold ETFs, Levered ETFs, and More…

Listen to The ETF Store Show every Tuesday at 9am on ESPN 1510 as we cover everything you need to know about Exchange Traded Funds and the world of investing.

On our most recent radio broadcast, we answered your questions on Exchange Traded Funds (ETFs) including whether gold ETFs actually hold physical gold bullion and if levered ETFs can be dangerous to individual investors.  We also explained how you can dollar cost average with ETFs and debated whether you should use market or limit orders when investing in ETFs.  Listen to the full show here to learn the answers to these and several other ETF-related questions.  Plus, catch our weekly market update and ETF Spotlight (ticker MINT).

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Are You Overpaying for Underperforming Mutual Funds?

Listen to The ETF Store Show every Tuesday at 9am on ESPN 1510 as we cover everything you need to know about Exchange Traded Funds and the world of investing.

On our most recent radio show, we let the data do most of the talking.  The data we’re referring to is mutual fund expense ratio and performance data.   According to the Investment Company Institute, the average expense ratio for actively managed equity mutual funds is 1.44%.  Compare that to equity ETFs such as SPY or VTI, which have expense ratios of .09% and .05%, respectively.  On the subject of fund performance, data provided by S&P Indices, who is recognized as a global leader in providing benchmark data, show that last year almost 85% of actively managed domestic equity mutual funds underperformed their benchmarks, including over 95% of large cap growth funds.  Over the last five years, 62% of all active domestic equity mutual funds underperformed including over 80% of large cap growth funds.  Actively managed bond mutual funds have fared even worse over the last five years with over 96% of investment grade long bond funds and greater than 70% of global income funds underperforming their benchmarks.  Furthermore, for those active fund managers who may generate outperformance in a given year, there is no consistency to this performance over multiple years.  Per S&P Indices, for the five years ending March 2012, only 5.23% of large-cap funds, 5.46% of mid-cap funds and 5.14% of small-cap funds maintained a top-half ranking over five consecutive 12-month periods. Random expectations would suggest a rate of 6.25%.

These are staggering – almost unbelievable – numbers, but on our program, we explained exactly why actively managed mutual funds are so expensive and why they underperform the majority of the time.  The bottom line is that actively managed mutual funds seem to us to be a case of overpaying for underperformance.  At The ETF Store, we believe in low cost asset allocation using Exchange Traded Funds where we know we’re going to capture the benchmark returns minus fees – the same benchmarks that the majority of active mutual funds aren’t hitting.  Instead of trying to get lucky and find the 1 in 20 managers who may consistently outperform, we’re going to focus on diversification and being in the right asset classes at the right times.  Listen to the full show here to learn more about why we think ETFs are a better way to go for most investors.  Plus, catch our weekly market update and ETF Spotlight (ticker SDY).

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Asset Allocation and ETFs

Listen to The ETF Store Show every Tuesday at 9am on ESPN 1510 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 critical aspect of successful investing – asset allocation.  A landmark study concluded that over 90% of the variability of long-term returns can be attributed to asset allocation.  In other words, the study concluded that the performance of your portfolio over the long-run isn’t determined by picking individual stocks or bonds or trying to time the market but instead, is based on asset allocation.  The words “asset allocation” may sound complex, but quite simply, they refer to investing in different types of investments that perform differently in different market and economic conditions.  The key here is different.

On our show, we explained how ETFs have completely changed the game for investors by allowing them to invest in a wide range of asset classes that previously were unavailable or difficult to access – investments like gold, commodities, real estate, and emerging market stocks and bonds.  ETFs allow investors to access just about any asset class around the globe and build a portfolio of investments that perform differently in different market conditions.  Unfortunately, a number of investment advisors simply put their clients in a cookie-cutter portfolio of stocks and bonds.  As we described on the show, if your investment advisor is only using mutual funds in your portfolio, there’s a pretty good chance that you don’t have exposure to some of the asset classes mentioned above.  At The ETF Store, we focus on asset allocation and use Exchange Traded Funds, or ETFs, to ensure our portfolios are anything but cookie-cutter.  Listen to the full show here to learn more about asset allocation and ETFs.  Plus, catch our weekly market update and ETF Spotlight (ticker IAU).

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