Just in case you missed it here are the links to our ETF Series …. Part 1 our Pilot and Part 2 ETF V Mutual Fund and Part 3 Structures: NAV and Part 4 Liquidity and Part 5 Tax Efficiency! and Part 6 Leverage and Inverse and Part 7 Fixed Income and Mismatching Liquidity ….
As the series concludes, we ran across the PERFECT chart to help make our point…
In 2019 a rule called the ETF Rule along with a second rule in 2020 called the Derivative rule opened up the proverbial spicket of ETF creations. These rules essentially were the last barrier for ETF’s to have no index mandates.
Concluding thoughts:
Originally an Index Only product – Can be almost any underlying Asset now – Attributes to growth/More ETF’s than Stocks today
Because of origin – Possible False Sense of safety by investors! Most important to remember!
Immediately Liquidity – Good for certain assets – Can be terrible for non liquid assets causing incorrect pricing
Lower costs for the entire industry- ETFs have forced tradition Mutual Fund pricing lower – BUT some ETF’s are not less expensive anymore
Once much different than a Mutual Fund – now looking very similar
In closing…. ETF’s were and are a trend maker in the beginning …. and at their roots … mostly index replicators. Due to popularity, synthetic additives and rule changes, some can be very dangerous and only meant for very situational circumstance that the normal investor may never face! Just because it is an ETF, it may not be a friendly investment …
Always knowing the making is needed in todays variances from originality.
That’s a wrap! Thanks for your attention and time!
John A. Kvale CFA, CFP
AI Content Authenticity: AI created the splash image. All of the following text content has been completed by myself and has not been edited or created by AI. Occasionally we do use AI for images and will note when appropriate.
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
