When did industry specific ETFs become a hot product??? I’m so confused.
Emily Patterson-Kane: I don’t think it’s new, Fidelity and Motley Fool were talking about them may years ago.
Christopher Hong: Sure. It’s just that half of talk about investing on FB groups is about which ETFs will beat the market…
Emily Patterson-Kane: Must be the groups you are on, I haven;t seen it mentioned anywhere but here.
Christopher Hong: Yeah the last one was pretty much geared towards personal finance and beginner investors
Christopher Hong: The last one I was on
Emily Patterson-Kane: ETFs are great for beginners. It’s where I started.
Christopher Hong: But industry specific ETFs pretty much defeat the purpose of an ETF… aren’t they meant to reduce risk for an average investor?
Emily Patterson-Kane: Christopher Hong The next step from all market is sector. Where you choose a sector that is doing well but don;t need to know how to pick a particular stock.
Christopher Hong: Okay. I disagree. I think there is more risk in those ETFs
Christopher Hong: Even if you think you can beat the market in it
Emily Patterson-Kane: Christopher Hong Less risk than in single stocks. It’s an intermediate option.
Emily Patterson-Kane: Christopher Hong You beat the market because some sectors do better than others seasonally and for other reasons.
Christopher Hong: I think people are just lucky when they choose an ETF that beats the market. Long term definitely not a sustainable option to me.
Christopher Hong: I don’t want to go into the fact that more diversification does not = less risk
Emily Patterson-Kane: Christopher Hong Most of mine are market beating multi-year. Others I bought because they would beat the market that year (foreign and emerging markets for the last year for example), but beating the market is not always the goal. One reason I use them is to avoid investing in things I am philosophically opposed to. What you can do with stocks you can do with sector ETFs but with less volatility.
Emily Patterson-Kane: Christopher Hong Except that in an overwhelming majority of cases it is.
Christopher Hong: https://youtu.be/zrCo0m5gSfc
Why Jack Bogle Doesn’t Like ETFs | Forbes
Christopher Hong: If I had to make a bet on aggregate ETF pickers will do significantly worse than the market in the long run
Christopher Hong: My point is that I believe ETF pickers will probably do much worse in the long run than general market investors.
Emily Patterson-Kane: If they lack the relevant skills and knowledge, sure, like any investing tool.
Christopher Hong: … wouldn’t people who have the knowledge and relevant skills actually avoid ETF picking?
Christopher Hong: … that’s my point I believe