The marriage of ETFs and passive investing, the current hot trend everyone’s talking about, isn’t a match made in heaven.
In fact, friction between the two is so huge, a divorce could crash markets irreparably.
On their own, both buying into ETFs and investing passively make sense. But loading up passive investing portfolios with ETFs – especially benchmark and market index following ETFs, which are precisely what passive investing calls for – is the equivalent of rubbing two sticks together over a mountain of dry kindling.
I’ve given you the numbers on how big ETFs have become and how hot passive investing is getting. And, to the chagrin of ETF sponsors and regulators, I’ve unpacked the truth for you about how ETFs are created and destroyed and how the market professionals with the inside track on trading ETF shares alongside the underlying securities they’re made from are self-serving.
Now, I’ll tell you what you need to do to protect your passive portfolio, your actively managed portfolio, and your you-know-what when the fire gets lit…
Exchange-traded funds (ETFs) are all about relationships, so the marriage of ETFs and passive investing looks perfectly fine on the surface. But frighteningly, the basis of their relationship and the reason they look like they pair well will actually be their downfall.
There’s the one thing you need to know about ETFs that you probably have no idea about.
I’m going to use a scary word to describe ETFs, although you won’t hear the word used when it comes to ETFs anywhere else. That’s because not many people understand that the word absolutely applies.
The people who know it’s the truth – the sponsors of ETFs, brokers, and regulators – don’t want you to ever think of “that” word when you think about ETFs.
ETFs are derivatives.
There, I’ve said it. Now you know.
Here’s everything that’s been kept from you about ETFs, and how sticking hundreds of billions of dollars-worth of them into passive investing accounts could crash the market…