MyPrivateBanking Blog
Daily Comments on the World of Wealth Management

Posts Tagged ‘ETFs’

Why Investing Has Become More Democratic Than Ever

Tuesday, July 20th, 2010

I am pondering one sentence I stumbled upon today:

“It is ironic that the markets are now at their most democratic at time when returns are at their nadir.”

This is from the blog abnormal returns, a great source of financial debate. Basically, indivividual investors today have all the tools and vehicles to free themselves from unhealthy advice and make their own decisions:

“The ironic thing is that at a time of poor returns, the information and tools available for investors have improved dramatically. This is largely a function of the rise of Internet. Abundant data, cheap trades and an explosion in investment vehicles, i.e. ETFs, have made it ever more possible for individuals to manage their portfolios how the largest institutions did just a few years prior.”

I still think that this investor heaven is a far cry from what most private investors do today. Most individuals are still entrusting their wealth to a bank or a wealth adviser who is not free of conflict of interest when picking investment products for their clients. Most private investors still believe their advisers when they tell them how to time the markets or pick individual stocks or bonds. And on top of everything, most investors still pay way too much money to their wealth managers. It will be a long time until the majority of private investors really takes investing in their own hands. But, in any case, the revolution has begun and it offers too many advantages to individual investors to be stopped. Particularly in times of low returns the weaknesses of trading-oriented and active stratgies of most wealth managers become very clear to investors.


Lots of Interesting Stuff On ETFs

Thursday, January 7th, 2010

Which was the best performing ETF in 2009? Which ETF could generate the most wealth for investors? Which ETFs did tank in 2009 and lose investors’ money?

If you want the answers to these and scores of other questions about ETFs in 2009, check out Morningstar’s great feature about the topic.

By the way, the most successful fund was a coal ETF (+145%), the MSCI Emerging markets fund by iShares produced the most wealth (USD 15.5 bn) for investors and leveraged short funds lost tons of money. I guess 2009 was no good year for the ETF bears….


Mutual Fund “Fee Blinders” and the Rise of ETFs

Monday, October 19th, 2009

On the weekend I came across two very interesting pieces that fit right into our past discussions:

The Wallstreet Journal recommends to all investors to take off their “fee blinders” when it comes to mutual funds. Research shows that investors become less sensitive to fund fees when the market rises. The article makes two very good suggestions: 1) Monetarize the fees you pay in absolute USD terms (or Euro if you want). 2) Run a shadow portfolio with indexes or low-cost-index-funds that match your actual funds and watch the performance difference grow in favor of the indices (most likely due to higher fees of your funds).

Barrons reports that “total ETF assets across the universe of 768 funds reached $695 billion as of Sept. 30, up from a mere half-billion dollars in 1993, with most of that increase having come in the past five years“. Wow!


Back To The Future: Chinese Internet Funds

Tuesday, July 21st, 2009

One of the last developments of the crazy tech stocks boom in 2000 was that banks started to launch very exotic funds on internet stocks. After stocks in traditional markets already went up tenfold and more a new “story” had to be invented: That of still “undervalued” tech stocks in “undervalued” regions. Shortly after the world of triple digit price/earnings-valuations collapsed these funds vanished for almost a decade.

However, just in time for the ten year anniversary of the Deutsche Bank launched last week an ETF on Chinese internet stocks. It is correct that neither internet stocks nor China are for investors a foreign territory as they used to be 10 years ago. Because of this familiarity with internet stocks investors nowadays do not accept missing of business models. Consequently, the upside of internet stocks is limited in many cases anyways. But unlike in 2000 this fund is launched in the middle of one of the world’s worst economic crises and not at the end of a bubble.

What does this tell me? Stock markets show cycles and these are about to be repeated. I cannot predict when and in which area the next bubble will build up, but I sure will look out carefully for the launch of funds on “Vietnamese e-commerce stocks”, “Bolivian coffee farms” or “Namibian solar parks”…

PS: With an annual 1.5% management fee the Chinese internet ETF is very expensive. Looks like the bankers thought an exotic ETF can demand an exotic pricing as well. Anohter indication that ETF does not automatically mean low fees.