The Fed Is Buying These ETFs - Part 2

In part one of this piece, I pointed out what ETFs the Federal Reserve had purchased as of May 19th. Since then, the Fed has purchased more of these ETFs and began buying corporate bonds directly, not through an ETF.

In this piece, we will look at whether or not you should follow the Fed's footsteps and buy these funds or other bond ETFs, or whether you should find your own path and buy non-bond ETFs in the days, weeks, and months to come.

The first issue with the Fed buying bond ETFs is that the demand for said ETFs likely rose when the Fed was buying. This is simply a supply and demand issue, especially when the bond ETFs wasn't able to issue new shares. Issuing new shares can only be done when the fund was able to purchase more bonds to bundle into its ETF. And since the Fed was dumping large amounts of money into the market in a rather short period of time, the likelihood that these funds where all able to increase their asset bases are not high.

So, the Fed has probably already pushed the price of these ETFs higher than where they would typically be trading. This is not good for new investors. Continue reading "The Fed Is Buying These ETFs - Part 2"

The Fed Is Buying These ETFs And Why It Matters (Part 1)

The Federal Reserve is doing everything it can right now to help prop up the US economy and minimize the impact of the Covid-19 pandemic has on the economy, including purchasing ETFs.. The Fed has, by almost all market participants' views, acted very quickly, very aggressively, and rather decisively in their attempt to limit both the short and long-term effects this pandemic has on the US economy, despite the country permanently shutting down for nearly two months.

The first move by the Fed was to reduce interest rates by lowering the Federal Funds rate. Then, they began buying Treasury Bonds and mortgage-backed securities, (they have of course performed a number of other 'lending' type activities that have lower rates for lending and made it easier for more money to flow into the system, but for the average person knowing that the Fed lowered interest rates and started buying Treasury bonds and mortgage-backed securities, that is really the gist of it. To read more about the exact things they have done, check this article out.) Both these moves the Fed has done in the past, so no surprise there when they announced their plans.

However, in an attempt to pump liquidity back into the market, maintain low-interest rates, give business leaders and consumers the confidence they need to continue spending the Fed is now also buying Exchange Traded Funds.

Why are they buying ETFs and not something else? Continue reading "The Fed Is Buying These ETFs And Why It Matters (Part 1)"

BNY Mellon With Truly Fee-Free ETF

BNY Mellon has been a player in the ETF industry for years, however until just recently, it was always a 'behind the scenes' player. In early April, the Bank of New York Mellon changed that in a big way by not only introducing three brand new ETFs but offering one of them to clients for free.

Yes, you read that correctly, the BNY Mellon US Large Cap Core Equity ETF (BKLC) has an expense ratio of zero. The fund doesn't charge you anything to own it. Furthermore, the Bank's two other ETFs come with extremely low fees, 0.04% for each of them.

The BNY Mellon US Mid Cap Core Equity ETF (BKMC) and the BNY Mellon US Small Cap Core Equity ETF (BKSE). Both fall in the top 1% of lowest funds when based on expense ratio, and that's while the BNY Mellon US Large Cap Core Equity ETF was technically the first ETF to offer a zero-expense ratio. Since the launch of these three funds on April 9th, BNY Mello has also launched a few other ETFs, all of which have low fees but one other that doesn't have any, the BNY Mello Core Bond ETF (BKAG).

You may be wondering about another ETF that has been touted as a zero-fee ETF or the first free ETF, it's the SoFi Select 500 ETF (SFY) and the SoFi Next 500 ETF (SFYX) however while they don't currently have an expense ratio, they could in the future. The reason for that is because the SoFi products have a fee reducing waiver, which would need to be renewed for the fund to maintain its zero-fee long term. Continue reading "BNY Mellon With Truly Fee-Free ETF"

4 ETFs You Should Start To Buy

Over the last few weeks, we heard first-quarter earnings from some major US companies. And while most of the earnings reports only gave a small glimpse of how the economic shutdown has affected their businesses, some companies performed much better than others. The companies one would expect to struggle when non-essential companies were forced to close and Americans were told to 'stay at home' obviously struggled. However, the technology companies that are allowing us to purchase products and have them delivered to our front doors, the companies that are allowing us to communicate with friends and family remotely and the infrastructure firms who offer the back-bone for millions of Americans to successfully work from home, well those companies are doing great, maybe better than ever.

So, let's take a look at some ETFs that hold those companies and one that may be a little outside the box but could be focused on one industry that could be a huge winner from 'stay at home' orders.

The first is the First Trust Dow Jones Internet Index Fund (FDN). FDN invests in a market-cap-weighted index of the largest and most liquid US internet companies. The FDN has 43 holdings, all of which are US-based companies. Its top 10 holdings make up 48% of the fund and the weighted average market cap is $214 billion. The fund has an expense ratio of 0.52%. Amazon, Facebook and Netflix are its three largest holdings and if Alphabet's stock wasn't split into two classes, that would likely be in the top four of FDN. The fund is up 6.29% year-to-date and higher by more than 21% over the past month, so as of May 1st, you have not lost any money owning this ETF in 2020, better yet, your up unlike most investments right now. Continue reading "4 ETFs You Should Start To Buy"

Stay Away From These Industry Focused ETFs

The economic impact caused by governments around the world to combat the spread of Covid-19 and save lives has taken its toll on nearly every industry. However, while there are arguments to be made that most of those industries will “bounce” back in a reasonable fashion, there is one in particular that truly may never be the same. Or at the very best not until we see a truly effective treatment for Covid-19 or a vaccine.

That industry is travel and leisure-tourism. The airlines have been battered, hotel stocks have been beaten up, and if tourist attractions around the world where publicly traded companies, most of them would have likely already filed for bankruptcy (mild attempt at a joke, you will still be able to visit the Grand Canyon and the pyramids in Egypt in the future.)

But in all seriousness, how long until you will feel comfortable going to New York city and jumping in an elevator to head to the top of the Empire State building? Or even fly to Denver, to stay in a crowded Vail Resorts owned ski resort and then sit on a chair lift or gondola with strangers? How about walk around and stand in lines at an amusement park? Go to a large sporting event or music venue? Continue reading "Stay Away From These Industry Focused ETFs"