Zero Fee Trades Likely Means Lower Fee ETFs - Part 2

Now that its clear investors understand how fees affect their returns and the financial industry as a whole is responding by lowering trading commissions to zero and cutting management fees on funds, its just a matter of time until we see ‘indexed’ funds begin to offer zero or near zero, as in 0.01% expense ratio, fee funds.

Why? Simple because they have to stay competitive if they want to stay in business.

For years the biggest argument for one someone would buy an index fund is because it would be so cumbersome and costly to go out and buy a few shares of all the different stocks that make up a specific index. For example, if an investor wanted to mimic the Dow Jones Industrial Average, they would need to go out and buy one share of each of the 30 companies that currently make up the index.

In the past, that would be 30 different stocks in someone’s personal portfolio, which honestly isn’t that much higher than what the average retail investor owns, typically somewhere between 15 and 20. However, that would also mean the investor would have paid a trading commission 30 different times in order to set up that portfolio (1 trading commission for each different company they bought a share or multiple shares of). If the average investor was paying $4.95 per trade, that’s $148.50 in trading commissions just so they could mimic the Dow Jones Industrial Average without having to pay a mutual fund or ETFs fees every year. Continue reading "Zero Fee Trades Likely Means Lower Fee ETFs - Part 2"

Zero Fee Trades Likely Means Lower Fee ETFs - Part 1

The investment world was flipped upside-down recently when Charles Schwab eliminated trading commissions on stocks, ETFs, and options last month. The move prompted TD Ameritrade, E*TRADE, and other players in the industry to follow suit quickly or risk losing clients. The move is not the first time we have seen trading commissions reduced, but never before have retail investors been able to trade literally for free.

Most people would claim that the late Jack Bogle started this ‘war on fee’s’ decades ago when he introduced the low-cost index fund at Vanguard. The first low-cost mutual funds offered investors an inexpensive, at the time, option for investors. The low fee option Vanguard introduced proved to be a good move as Vanguard grew its asset base into what is now more than $5.5 trillion. Over the years, other firms began to fight back by cutting their fees, but the war had already started, and investors began to see the value in low-cost options.

Jack Bogle himself would often talk about how fees cost investors hundreds of thousands of dollars over their investing lifetime. The simple idea of paying lower fees equates to higher account balances over time makes perfect sense, especially to anyone who understands the power of compounding returns.

Zero fees on trading commissions will leave millions of dollars in investors' hands. It has been estimated that Charles Schwab alone will lose out on somewhere between $90 and $100 million in quarterly revenue now that they cut their trading fee to zero. That is just $100 million for one firm and one quarter. Based on those figures only of Schwab, we could easily see somewhere close to $1 billion is left in the hands of investors over the course of a year.

Now that we have hit zero fees on trading commissions and investors continue to learn how low-cost investing helps their overall returns, it's likely we will see more fee-cutting throughout the investing industry. The high fee’s on mutual funds have already begun pushing investors to ETFs. And the ETF industry has already started fighting the battle to cut costs. Continue reading "Zero Fee Trades Likely Means Lower Fee ETFs - Part 1"

It May Be Time To Buy Marijuana ETFs

All the hype and excitement surrounding the marijuana industry over the past few years has finally died down. Unfortunately for some investors, who got caught up in the hype and excitement, are now realizing what some knew all along; the marijuana industry has a long way to go before it achieves its full potential.

But, regardless of whether you were an ‘early’ investor in the industry or someone who has been sitting on the sidelines, now is the time to start getting serious about marijuana funds. Over the past three months, the five marijuana ETFs have lost 30% or more of their value. Obviously, this is due to the marijuana industry as a whole, seeing their stock values decline. However, this means some of the stocks in the industry which had been trading at ‘lofty’ valuations have come back down to earth quite a bit.

Over the last three months, Tilray is down 45%, Canopy is down 38%, Aurora is down 42%, Cronos is off by 40%. These are some of the big names in the marijuana industry and stocks held by the marijuana ETFs; ETFMG Alternative Harvest ETF (MJ), AdvisoreShares Pure Cannabis ETF (YOLO) , Cambria Cannabis ETF (TOKE), The Cannabis ETF (THCX), and Amplify Seymour Cannabis ETF (CNBS).

But why is now the time to start buying? Continue reading "It May Be Time To Buy Marijuana ETFs"

Bitcoin And Cryptos Tank After Futures Trading Begins

During the last week of September, the major cryptocurrencies got crushed. Bitcoin fell more than 20% from September 21st through September 26th and then slightly rebounded on the 27th by a little less than 2%. A 20% drop for the most well-known cryptocurrency is not uncommon these days, as it fell that much back in July. However, that doesn’t make it an easy pill to swallow when it happens.

But while Bitcoin fell 10% on September 24th, it's closet rivals, Ethereum, Ripple, Litecoin, and bitcoin cash fell even more, somewhere between 15% and 20% respectively. The likely cause was the lack of interest from institutional investors after the highly anticipated Bakkt crypto platform began trading its “physically” settled bitcoin futures contracts.

The Bakkt platform was announced more than a year ago and had partnerships with Microsoft and Starbucks and was being touted as a way for institutional investors to get involved with cryptocurrencies. The platform allows futures trading of crypto’s but settles the order with physical coins, not cash like other crypto futures platforms currently offer. The thinking was that because the futures contracts had to be settled with actual coins, this would increase the demand for the different crypto’s being traded through the futures contracts.

However, during the first hour, the platform was live, only five contracts were traded, and even after ten hours, only 28 contracts had traded hands. Many industry experts, both who follow the crypto markets and general futures contracts actually have come out and stated this sort of activity is normal for the first few days of a new commodity being offered through regulated futures contracts. They claim some brokers aren’t ready to clear it, while others want to wait and see how things go, while others may not even have the tickers populated on their risk systems. Continue reading "Bitcoin And Cryptos Tank After Futures Trading Begins"

Dividend Stocks Yielding More Than Bonds

A weird thing happens when investors start seeing signs of a recession or just start convincing themselves that a recession is inevitable and coming soon; interest rates begin to fall, which means bond yields begin to drop. Most investors are told when they start investing that stocks are risky, but they offer better long-term growth, while bonds are safer, but they don’t offer investors as much potential growth.

While these statements may be true during certain situations, they certainly don’t always hold true. Sometimes, stocks may be both less risky and offer higher growth than bonds. I personally believe now be may one of those times.

As things sit now, bonds are offering rather low yields. The three-month treasury is paying 1.78%, the 12-month treasury is paying 1.75%, while the even longer five-year treasury is only offering a yield of 1.56%. The ten-year treasury is at 1.68%, and the 30-year treasury is sitting at 2.13%. These returns are hardly likely to keep up with inflation over those longer periods. Buying an investment that may just keep up with inflation seems somewhat risky to me.

Even the bond ETFs that have performed well year-to-date and pay yields to their investors aren’t currently offering anything much better than what investors can get from Treasuries. The Vanguard Long-Term Corporate Bond ETF (VCLT) which is up 21% year-to-date is offering one of the best yields at 3.5%. But this ETF is rather risky considering if, and when interest rates turn around, this fund will get hit.

On the other hand, certain stocks are currently offering higher yields, while also offering the chance for stock price appreciation, regardless of which way interest rates run. Let’s take a look at a few of my person favorites equity Exchange Traded Funds, which offer both growth and healthy, reliable yields. Continue reading "Dividend Stocks Yielding More Than Bonds"