(Those on the edge of your seats… this post accidentally set for 10:30 PM… such the delayed email today… carry on)
Working on the Q2 Newsletter and with a fabulous article about ETF’s (Exchange Traded Fund) in the making, as promised from last week, wanted to share in short version, here in this format, in advance….
ETF Index SPY is Born
This first Index ETF, traded (s) on the exchanges as SPY can be purchased just like a stock, during market hours and even after market hours in the much less stable and liquid extended market hours. Today just like when it was established, trades at 1/100 of the actual index value. I.e. Index 3300, SPY 330.
This Index ETF allowed investors the ability to purchase one asset, under the ticker SPY, just like an individual stock, but hold 500 stocks, in this case the Standard and Poor’s 500, generally known as the largest US public companies in the world all at once and have throughout the day ability to buy or sell.
Prior to the SPY, there were certainly Mutual Funds (and still are today) that represent the same index, but were only tradable at the end of each day, also called end of day settlement.
In an ever faster moving world, the ETF has gaining appeal and continued money flows through low cost purchase.
Time Flies When We Are Having Fun – National Quote 1.5 Decade Ago Still Pertinent
Oddly, the following quote in 2006, actually still hits to the heart of an important topic of this article today…
Managers Look Ahead To Era Of Rate Declines
BY MURRAY COLEMAN
INVESTOR’S BUSINESS DAILY
Posted 10/6/2006
“The interim period while we’re not raising or lowering rates is a time to build ETF watch lists,” said John Kvale, a Dallas- based adviser. “If it’s a soft landing for the economy, then our belief is that we’ll gravitate much more toward higher-quality stock funds.” He’s moving clients away from small-cap ETFs. The funds he favors now include S&P 500 tracker SPDRs. (SPY) “We’re holding off right now on investing in more sector-specific ETFs,” Kvale said.
Fast Forward to the Growth of ETF’s
From Ishares/Black Rock and Visual Capitalist
As long as there is demand, Wall Street will Build!
Next up, beginnings of Danger!
Have a Great “ETF Creation” Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
32.862841
-96.808100
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Money Versus Markets from Our Friends at Visual Capitalist … Quadrillion Notional Value
The most interesting part of this chart from our friends at Visual Capitalist in our opinion is the synthetic versus notional value of assets… What?
Ok… so we laid some Wall Street Gibberish on you…
All of this is near the end of the chart…
Derivatives …. A synthetic product is basically a product of some type that allows you to use a small amount of money to control a larger amount of assets… most importantly for a defined period of time…..
Used correctly, most of these types of products are for lowering risk, also called hedging…
Used aggressively, these products are speculative and can cause harm to an investors portfolio….
Notional or real value of the assets held by Derivatives are currently a Quadrillion … not a term used frequently… such the interest…
It’s a long chart, but very informative and interesting… take a moment to digest… think it worth it!
Hope you enjoyed !
Have a Great “Quadrillion Notional Value” 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
-96.808100
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Posted in Chart, Investing/Financial Planning, Market Comments
Tagged Derivatives, Notional, Synthetic, Visual Capitalist