Earlier here in the first part of our ETF Post from our coming Q2 Newsletter, we spoke of the creation and massive growth.
The original Index ETF, was called by its ticker, SPY AKA Spider!
If They Buy, Wall Street Will Build – Beginnings of a Problem
Wall Street is just like many other businesses, in that if someone will buy it, they will build it. Recall the rush to bring “.com” companies public in the late 90’s, due to the insatiable appetite by investors, who were also experiencing the newly minted power of the internet itsself.
The following, again from IShares and Visual Capitalist shows the proliferation of various types of ETF’s.
Dangers in the Making
Once a single Index ETF, now a plethora of over 6000 and counting different ETF assets. Given the fact that investors do not need duplicate index ETF’s, many new ETF’s do not track anything, and can even get into the woods in uncharted, unique and illiquid types of assets.
US Exchanges are currently logging a shrinking number of public companies due to cost, liability, red tape, and mega mergers.
There are only about 5000 US Traded companies on the exchanges, with a much larger, but very small capitalization of international companies. With this in mind, there must be tons of overlapping ETF holdings.
There are also fledgling ETF’s that will likely never gain traction.
Next Up, The Dangers and What To Avoid…
Have a Great “Proliferation of ETF’s” Day!
$treet-¢ents 
Why Price is So Important – An Extreme Almost 17 Years to Break Even, Example!
We actually had planned on putting this in the Q1 2021 Newsletter, but you guys gave us so many great topics, this hit the cutting room floor.
This is an important enough reminder that we wanted to go ahead and send it to you!
By no means are we predicting this will occur again, and we picked a graphic example for sizzle. But living through this first hand, we know it can happen.
The following is a chart of an index that was full of dot coms … an index that ran to overzealous levels in late 1999 and early 2000.
Had an investor had the misfortune of buying at the very top, it would have taken them about 17 years to break even.
Again we’re not saying this will happen as post the 1999 .com mania many of the companies that were brought public went bankrupt in short order.
Once again, this is an extreme example of what can happen when prices move away from the true value, but worth remembering – we sure will!
Again not meant to frighten just too enlighten!
Have a Great “Reminder that Price Matters” Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents
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Posted in Investing/Financial Planning, Market Comments, Retirement Planning
Tagged .com, .com bubble, 1999, QQQ