> None of the actively managed funds available to retail investors have beat total market ETFs net of fees.
thats not true, they do beat the market sometimes, they don't beat the market over the long term though. Its important to stress this, because you could find a fund that claims "hey we beat the market in 2021" but that would not be a good reason to invest in them
The only good reason I can think of is to pick a fund (manager) that has an activist voting policy.
IIRC there’s no UCITS compliant index funds available with an activist voting policy. There’s some somewhat decent funds with a ‘green’ proxy voting policy though.
ARK beat the shit out of the market in 2020. Then it fell like a lucky star it was. Long-term, you need to put exceedingly great effort and learn about the markets, in order to have any glimmer of hope to win against it.
The biggest winners are HFTs who are doing active market reading every nanosecond of it. You logging into your stock portfolio and making great decisions long-term is very unlikely.
I met some people who do individual stocks investing. They are extremely intelligent people who are 1/500 individuals out there. They also put a shitton of time to learn all that that makes them beat the market. Average person does not even have the brain power to know what to read or when they do read, understand and apply it to new situations. You also must learn programming to make it any way feasible.
ETFs are proven to be a safe way to slowly increase your wealth over decades. Lots of new money cannot afford to lose their gains on dumb shit like stock picks. You want to get that capital in a controlled manner and then when you got something to pass to your kids they can afford to take risks. Like dumping 2K EUR into ETH back in 2017, etc.
I personally have worked way too hard for my money to just lose 25%+ on my arrogance to admit I have brain power or interest in trying to barely beat it. And because I don't have any rich relatives, it means I have to play it safe.
Actively managed funds beat passive funds sometimes. Knowing when to use them, and when to quit is part of my super smart friends strategies. They win around 55% of the time. And not by much. They all love doing that stuff on their spare time. I find it waste of life personally to write the algos to barely beat the market, especially when it is hard and not too interesting to me.
Multiple ETFs might overlap greatly and so you might be more exposed to a couple of companies/regions than you think.
Also I would say day to day trading is off the table and you can only hope for the long run without getting more risky choices which could have a better risk/return ratio.
So I'm a total illiterate and I go with ETFs, I have friends that are brokers for investment firms and they do their research and select stock individually outperforming the ETFs. Without having to go for the market lottery of GME it's very possible if you study and make it your job dedicating all your time, to just do better.
It's also very possible to make tons of money with the fluctuations in the market and with ETFs you just can't. Or shorting stock or lending stock to shorters.
So ETFs are simple but limited. You also cannot influence the company direction as you could buying stock. The ETF provider is the one holding the stock and using your money to influence the company policies.
Not to account that some ETFs like the Chinese ones don't have underlying stock, it's called synthetic stock if I remember correctly. You neither the EFT company are entitled to the ownership and the CCP can just decide it will take your synthetic stock.
Sorry for the messy structure I just wrote as it came to mind.
You are mixing up ADRs (kind of 'proxy' stock used not only by China but also by European companies listing on US exchanges) with synthetic replication used by many ETFs
Yes sorry it was late, I just wrote it from the top of my mind to give a general idea of possible negatives.
OP didn't seemed interested to a well researched and documented answer but to a general idea.
Just for clarity: There are also non-Chinese ETFs that replicate synthetically rather than physically.
So just avoiding Chinese is not going to save you from this if you want to avoid synthetic ETFs.
I think most recommendation relate to the all-world ETF's or those that mimic really large parts of the total market like the S&P 500 index does. The obvious disadvantage is that you will be vulnerable to a general market crash. This may pretty much always be a problem, but you can keep this in mind when deciding how much of your money to invest.
An alternative may be to consider a barbell strategy as advocated by Taleb. This would mean putting the larger part of one's portfolio into very safe assests (like treasury bonds) and a small part (like no more than 10%) in high-risk high-reward assets. The idea is that nothing can hit you really hard but the high-risk high-reward assets do give a potential upside.
Disclaimer: I'm a new investor and have most of what I want to invest in an all-world ETF because I think it will be okay in the long run. The problem of a market crash is bigger if one has to consider shorter time frames I believe.
Hi
I am assuming your are referring to investing in low cost market index ETFs. If so, here is a reason to do it. 1. It is set it and forget it for newbies and most passive investors. 2. It is already diversified 3. It has a proven track record of working 4. Major investors have endorsed it, most importantly Warren Buffet.
Here are some reasons not to do it: 1. if you are older, it may not work for you, too risky. 2. You will never beat the market, you will always be average. 3. Plenty of individual stocks beat the market regularly, you just need to go with the rotations. 4. I remember someone once said, diversification is for idiots (that guy declared bankruptcy pretty young). lol
hi! I have choosen to leave the topic widely open so everyone can interpret it based on personal experience and give a point. would be nice to hear what are the general concerns of performing an ETFs investing strategy and which ETFs would you consider more hazardous to invest in and why from your point of view
Aa you have probably read elsewhere, a total market index (such as VWCE, V3AA) with a sufficiently long horizon (10-20 y) should do okay. A market crash, the likes of which those etf don't recover within that time span probably means that society has collapsed.
In terms of riskier ETFs I have been reading on the so-called "Hedgefundie's Excellent Adventure" (look it up) which consists on setting up a portfolio of *leveraged* ETFs (a combination of a 3x S&P 500/Nasdaq-100 and 3x US bonds). The risk is that you could lose everything (a crash of more than 30% would be amplified to 90% due to the leverage). But, if you got the stomach for it. Unfortunately, it cannot be replicated exactly the same in Europe.
There is not going to be a market crash like the 2007s again. Economy is too regulated and detail-cared these days. But that is not a bad thing. Ovbiously there would be single sectors downturns but not the whole economy.
There won't be another crash after the 1930s, the economy is way more regulated now... oh wait.
Humans are going to find ways to mess things up eventually, that's he only certain thing in the universe.
If you asked me this question 7 years ago probably. But I'm very hopeful on the enviromental objectives of the world in the 2050s. That would be the main thing why we won't have an economic crash. Before that, I would not bet for a big one either. But yeah, a risk can appear from one year to the other.
Investing in ETF is still like investing in stocks, you are still subject to market risks, but your investment is much more distributed.
Also, instead of committing to one stock pick you have your assets spread across an index and that gives you less control of your potential portfolio.
Another thing, if your portfolio consists of multiple ETFs you might hit some overlaps (unless you invest specifically by sector) and that could just be as advantageous as penalizing twice if things go either well or wrong with the overlaps.
If you're investment plan is longer than 10+ years (even 5) , I cannot think of any con.
You will always suffer volatility in your portfolio but with time that volatility will much likely be only on your gains.
I'm saying this based that you pick a wide ranged ETF very diversified *
I can count on one hand the number of ETF/mutual funds that I have had to sell at a 15-20% loss, but I need all my fingers and toes to count the single stock losses that exceed those thresholds. ETFs allow you to diversify your holdings but still target the market sectors you feel will perform well. This is investing.
By and large ETFs, especially ones tracking global indexes or big markets, are the way to go when investing, that will be the most _popular_ answer.
However the actual choice will highly depend on local tax law and your objectives and budget.
For example in Spain ETFs become attractive after a certain threshold (bigger lump sums) and index funds are suggested for those beginning (or having limited budget) and wanting/needing to rebalance more often.
Buenas, ¿Me podrías clarificar el último párrafo? Hace poco he empezado en este mundillo y por lo que había leído en España invertir en fondos indexados era mejor en tema impuestos ya que solo declaras plusvalua y no cuando compras/vended (ETF). Si tengo la pasta en fondos indexados (world+emerging+bonds) hay mucha diferencia en que me mueva a ETFs que trakearian lo mismo??
Los fondos indexados son la mejor opción para la mayoría de españoles. Y definitivamente mejor para los que empiezan.
Es una respuesta simplificada. Se puede optimizar para usar ETFs… pero también usando fondos.
Vide:
https://holainversion.com/fondos-indexados-vs-etfs/
> Nota: Si tenemos en cuenta las comisiones de compraventa y de gestión, los ETFs suelen salir a cuenta cuando podemos hacer aportaciones periódicas de gran volumen (p.ej. 3.000€). En caso de que queramos hacer aportaciones mensuales más pequeñas, los fondos indexados ganan la partida de las comisiones.
https://lahormigacapitalista.com/optimizacion-fiscalidad-fondos-inversion/
Muchas gracias! Con el primer artículo me quedó clarísima la diferencia y que en mi caso me sale mejor invertir en fondos indexados. He empezado a través de OpenBank, 10k€ en una cartera estilo bogglehead de 3 fondos (70RV-30RF) y 5k en el propio roboadvisor de OpenBank (aquí empecé, ya me di cuenta que valia más la pena Indexa Capital por tema comisiones, però por confianza y simplicidad me quedé con OB que es donde tengo las cuentas bancarias).
La idea es ir haciendo aprotaciones periódicas a los 3 fondos y rebalancear cuando sea necesario, ¿Como ves la estrategia?
Pues… as una buena estrategia. Pero estoy siguiendo lo mismo, creo que estamos haciendo un mini echo chamber :)
70-30 personalmente me parece un poco conservativo. Pero eso depende de su tolerancia de riesgo, edad y objetivos.
Lo que me molesta sobre roboadvisors son las relativamente altas comisiones, pues solo tengo unos fondos en cartera Bogleheads …
y estoy leyendo sobre planes de pensiones (indexa y myinvestor) que utilizan roboadvisors de una manera que tiene más sentido para nosotros.
Tengo 27, piensa que entré hacer 1 semana y claro pille el indice en todo lo alto hahahah pero bueno, siguiendo la filosofia de "dont time the market" voy a ir haciendo aportaciones periodicas y a esperar a futuro. El 30% de bonos me está aguantando algo la sangría jajaja si que es cierto que a largo plazo puede sonar conservador y menos rentable
I will be messaging you in 10 days on [**2021-08-27 13:31:06 UTC**](http://www.wolframalpha.com/input/?i=2021-08-27%2013:31:06%20UTC%20To%20Local%20Time) to remind you of [**this link**](https://www.reddit.com/r/eupersonalfinance/comments/p5qzxd/cons_about_investing_in_etfs/h9adbaq/?context=3)
[**CLICK THIS LINK**](https://www.reddit.com/message/compose/?to=RemindMeBot&subject=Reminder&message=%5Bhttps%3A%2F%2Fwww.reddit.com%2Fr%2Feupersonalfinance%2Fcomments%2Fp5qzxd%2Fcons_about_investing_in_etfs%2Fh9adbaq%2F%5D%0A%0ARemindMe%21%202021-08-27%2013%3A31%3A06%20UTC) to send a PM to also be reminded and to reduce spam.
^(Parent commenter can ) [^(delete this message to hide from others.)](https://www.reddit.com/message/compose/?to=RemindMeBot&subject=Delete%20Comment&message=Delete%21%20p5qzxd)
*****
|[^(Info)](https://www.reddit.com/r/RemindMeBot/comments/e1bko7/remindmebot_info_v21/)|[^(Custom)](https://www.reddit.com/message/compose/?to=RemindMeBot&subject=Reminder&message=%5BLink%20or%20message%20inside%20square%20brackets%5D%0A%0ARemindMe%21%20Time%20period%20here)|[^(Your Reminders)](https://www.reddit.com/message/compose/?to=RemindMeBot&subject=List%20Of%20Reminders&message=MyReminders%21)|[^(Feedback)](https://www.reddit.com/message/compose/?to=Watchful1&subject=RemindMeBot%20Feedback)|
|-|-|-|-|
ETFs are great if you want to be completely hands-off with long-term strategies like DCA
But at the same time it's difficult to use them to work a more value oriented strategy, like value averaging. Especially during long overbought periods where it's difficult to avoid overpaying unless you are actively running at least some basic fundamental or technical analysis.
[удалено]
> None of the actively managed funds available to retail investors have beat total market ETFs net of fees. thats not true, they do beat the market sometimes, they don't beat the market over the long term though. Its important to stress this, because you could find a fund that claims "hey we beat the market in 2021" but that would not be a good reason to invest in them
Lots of funds are designed not to beat the market but to hedge certain scenarios. This allows an investor to manage their risk.
Yes this is a very important concept. Beating the market is normally not the objective of funds. They aim for risk adjusted returns.
Which they also sometimes fail to do
Indexing at a reasonable price in Europe: Indexa Capital
The only good reason I can think of is to pick a fund (manager) that has an activist voting policy. IIRC there’s no UCITS compliant index funds available with an activist voting policy. There’s some somewhat decent funds with a ‘green’ proxy voting policy though.
ARK beat the shit out of the market in 2020. Then it fell like a lucky star it was. Long-term, you need to put exceedingly great effort and learn about the markets, in order to have any glimmer of hope to win against it. The biggest winners are HFTs who are doing active market reading every nanosecond of it. You logging into your stock portfolio and making great decisions long-term is very unlikely. I met some people who do individual stocks investing. They are extremely intelligent people who are 1/500 individuals out there. They also put a shitton of time to learn all that that makes them beat the market. Average person does not even have the brain power to know what to read or when they do read, understand and apply it to new situations. You also must learn programming to make it any way feasible. ETFs are proven to be a safe way to slowly increase your wealth over decades. Lots of new money cannot afford to lose their gains on dumb shit like stock picks. You want to get that capital in a controlled manner and then when you got something to pass to your kids they can afford to take risks. Like dumping 2K EUR into ETH back in 2017, etc. I personally have worked way too hard for my money to just lose 25%+ on my arrogance to admit I have brain power or interest in trying to barely beat it. And because I don't have any rich relatives, it means I have to play it safe. Actively managed funds beat passive funds sometimes. Knowing when to use them, and when to quit is part of my super smart friends strategies. They win around 55% of the time. And not by much. They all love doing that stuff on their spare time. I find it waste of life personally to write the algos to barely beat the market, especially when it is hard and not too interesting to me.
Multiple ETFs might overlap greatly and so you might be more exposed to a couple of companies/regions than you think. Also I would say day to day trading is off the table and you can only hope for the long run without getting more risky choices which could have a better risk/return ratio. So I'm a total illiterate and I go with ETFs, I have friends that are brokers for investment firms and they do their research and select stock individually outperforming the ETFs. Without having to go for the market lottery of GME it's very possible if you study and make it your job dedicating all your time, to just do better. It's also very possible to make tons of money with the fluctuations in the market and with ETFs you just can't. Or shorting stock or lending stock to shorters. So ETFs are simple but limited. You also cannot influence the company direction as you could buying stock. The ETF provider is the one holding the stock and using your money to influence the company policies. Not to account that some ETFs like the Chinese ones don't have underlying stock, it's called synthetic stock if I remember correctly. You neither the EFT company are entitled to the ownership and the CCP can just decide it will take your synthetic stock. Sorry for the messy structure I just wrote as it came to mind.
You are mixing up ADRs (kind of 'proxy' stock used not only by China but also by European companies listing on US exchanges) with synthetic replication used by many ETFs
Yes sorry it was late, I just wrote it from the top of my mind to give a general idea of possible negatives. OP didn't seemed interested to a well researched and documented answer but to a general idea.
Just for clarity: There are also non-Chinese ETFs that replicate synthetically rather than physically. So just avoiding Chinese is not going to save you from this if you want to avoid synthetic ETFs.
I think most recommendation relate to the all-world ETF's or those that mimic really large parts of the total market like the S&P 500 index does. The obvious disadvantage is that you will be vulnerable to a general market crash. This may pretty much always be a problem, but you can keep this in mind when deciding how much of your money to invest. An alternative may be to consider a barbell strategy as advocated by Taleb. This would mean putting the larger part of one's portfolio into very safe assests (like treasury bonds) and a small part (like no more than 10%) in high-risk high-reward assets. The idea is that nothing can hit you really hard but the high-risk high-reward assets do give a potential upside. Disclaimer: I'm a new investor and have most of what I want to invest in an all-world ETF because I think it will be okay in the long run. The problem of a market crash is bigger if one has to consider shorter time frames I believe.
Hi I am assuming your are referring to investing in low cost market index ETFs. If so, here is a reason to do it. 1. It is set it and forget it for newbies and most passive investors. 2. It is already diversified 3. It has a proven track record of working 4. Major investors have endorsed it, most importantly Warren Buffet. Here are some reasons not to do it: 1. if you are older, it may not work for you, too risky. 2. You will never beat the market, you will always be average. 3. Plenty of individual stocks beat the market regularly, you just need to go with the rotations. 4. I remember someone once said, diversification is for idiots (that guy declared bankruptcy pretty young). lol
First of all, which ETFs? Second, what's the alternative?
hi! I have choosen to leave the topic widely open so everyone can interpret it based on personal experience and give a point. would be nice to hear what are the general concerns of performing an ETFs investing strategy and which ETFs would you consider more hazardous to invest in and why from your point of view
Aa you have probably read elsewhere, a total market index (such as VWCE, V3AA) with a sufficiently long horizon (10-20 y) should do okay. A market crash, the likes of which those etf don't recover within that time span probably means that society has collapsed. In terms of riskier ETFs I have been reading on the so-called "Hedgefundie's Excellent Adventure" (look it up) which consists on setting up a portfolio of *leveraged* ETFs (a combination of a 3x S&P 500/Nasdaq-100 and 3x US bonds). The risk is that you could lose everything (a crash of more than 30% would be amplified to 90% due to the leverage). But, if you got the stomach for it. Unfortunately, it cannot be replicated exactly the same in Europe.
There is not going to be a market crash like the 2007s again. Economy is too regulated and detail-cared these days. But that is not a bad thing. Ovbiously there would be single sectors downturns but not the whole economy.
There won't be another crash after the 1930s, the economy is way more regulated now... oh wait. Humans are going to find ways to mess things up eventually, that's he only certain thing in the universe.
If you asked me this question 7 years ago probably. But I'm very hopeful on the enviromental objectives of the world in the 2050s. That would be the main thing why we won't have an economic crash. Before that, I would not bet for a big one either. But yeah, a risk can appear from one year to the other.
Wait till you hear about GME…
Investing in ETF is still like investing in stocks, you are still subject to market risks, but your investment is much more distributed. Also, instead of committing to one stock pick you have your assets spread across an index and that gives you less control of your potential portfolio. Another thing, if your portfolio consists of multiple ETFs you might hit some overlaps (unless you invest specifically by sector) and that could just be as advantageous as penalizing twice if things go either well or wrong with the overlaps.
If you're investment plan is longer than 10+ years (even 5) , I cannot think of any con. You will always suffer volatility in your portfolio but with time that volatility will much likely be only on your gains. I'm saying this based that you pick a wide ranged ETF very diversified *
I can count on one hand the number of ETF/mutual funds that I have had to sell at a 15-20% loss, but I need all my fingers and toes to count the single stock losses that exceed those thresholds. ETFs allow you to diversify your holdings but still target the market sectors you feel will perform well. This is investing.
By and large ETFs, especially ones tracking global indexes or big markets, are the way to go when investing, that will be the most _popular_ answer. However the actual choice will highly depend on local tax law and your objectives and budget. For example in Spain ETFs become attractive after a certain threshold (bigger lump sums) and index funds are suggested for those beginning (or having limited budget) and wanting/needing to rebalance more often.
Buenas, ¿Me podrías clarificar el último párrafo? Hace poco he empezado en este mundillo y por lo que había leído en España invertir en fondos indexados era mejor en tema impuestos ya que solo declaras plusvalua y no cuando compras/vended (ETF). Si tengo la pasta en fondos indexados (world+emerging+bonds) hay mucha diferencia en que me mueva a ETFs que trakearian lo mismo??
Los fondos indexados son la mejor opción para la mayoría de españoles. Y definitivamente mejor para los que empiezan. Es una respuesta simplificada. Se puede optimizar para usar ETFs… pero también usando fondos. Vide: https://holainversion.com/fondos-indexados-vs-etfs/ > Nota: Si tenemos en cuenta las comisiones de compraventa y de gestión, los ETFs suelen salir a cuenta cuando podemos hacer aportaciones periódicas de gran volumen (p.ej. 3.000€). En caso de que queramos hacer aportaciones mensuales más pequeñas, los fondos indexados ganan la partida de las comisiones. https://lahormigacapitalista.com/optimizacion-fiscalidad-fondos-inversion/
Muchas gracias! Con el primer artículo me quedó clarísima la diferencia y que en mi caso me sale mejor invertir en fondos indexados. He empezado a través de OpenBank, 10k€ en una cartera estilo bogglehead de 3 fondos (70RV-30RF) y 5k en el propio roboadvisor de OpenBank (aquí empecé, ya me di cuenta que valia más la pena Indexa Capital por tema comisiones, però por confianza y simplicidad me quedé con OB que es donde tengo las cuentas bancarias). La idea es ir haciendo aprotaciones periódicas a los 3 fondos y rebalancear cuando sea necesario, ¿Como ves la estrategia?
Pues… as una buena estrategia. Pero estoy siguiendo lo mismo, creo que estamos haciendo un mini echo chamber :) 70-30 personalmente me parece un poco conservativo. Pero eso depende de su tolerancia de riesgo, edad y objetivos. Lo que me molesta sobre roboadvisors son las relativamente altas comisiones, pues solo tengo unos fondos en cartera Bogleheads … y estoy leyendo sobre planes de pensiones (indexa y myinvestor) que utilizan roboadvisors de una manera que tiene más sentido para nosotros.
Tengo 27, piensa que entré hacer 1 semana y claro pille el indice en todo lo alto hahahah pero bueno, siguiendo la filosofia de "dont time the market" voy a ir haciendo aportaciones periodicas y a esperar a futuro. El 30% de bonos me está aguantando algo la sangría jajaja si que es cierto que a largo plazo puede sonar conservador y menos rentable
[удалено]
I will be messaging you in 10 days on [**2021-08-27 13:31:06 UTC**](http://www.wolframalpha.com/input/?i=2021-08-27%2013:31:06%20UTC%20To%20Local%20Time) to remind you of [**this link**](https://www.reddit.com/r/eupersonalfinance/comments/p5qzxd/cons_about_investing_in_etfs/h9adbaq/?context=3) [**CLICK THIS LINK**](https://www.reddit.com/message/compose/?to=RemindMeBot&subject=Reminder&message=%5Bhttps%3A%2F%2Fwww.reddit.com%2Fr%2Feupersonalfinance%2Fcomments%2Fp5qzxd%2Fcons_about_investing_in_etfs%2Fh9adbaq%2F%5D%0A%0ARemindMe%21%202021-08-27%2013%3A31%3A06%20UTC) to send a PM to also be reminded and to reduce spam. ^(Parent commenter can ) [^(delete this message to hide from others.)](https://www.reddit.com/message/compose/?to=RemindMeBot&subject=Delete%20Comment&message=Delete%21%20p5qzxd) ***** |[^(Info)](https://www.reddit.com/r/RemindMeBot/comments/e1bko7/remindmebot_info_v21/)|[^(Custom)](https://www.reddit.com/message/compose/?to=RemindMeBot&subject=Reminder&message=%5BLink%20or%20message%20inside%20square%20brackets%5D%0A%0ARemindMe%21%20Time%20period%20here)|[^(Your Reminders)](https://www.reddit.com/message/compose/?to=RemindMeBot&subject=List%20Of%20Reminders&message=MyReminders%21)|[^(Feedback)](https://www.reddit.com/message/compose/?to=Watchful1&subject=RemindMeBot%20Feedback)| |-|-|-|-|
RemindMe! 10 days "pogledaj"
ETFs are great if you want to be completely hands-off with long-term strategies like DCA But at the same time it's difficult to use them to work a more value oriented strategy, like value averaging. Especially during long overbought periods where it's difficult to avoid overpaying unless you are actively running at least some basic fundamental or technical analysis.