ETFs are not WMDs

RYAN  By Guest Blogger Ryan Lewenza

A recently published report on ETFs has been making the rounds with its doomsday prediction that “ETFs are ‘weapons of mass destruction’ that have distorted stock prices and created the potential for a market selloff.” With us being strong supporters of ETFs and only use them when building client portfolios, we felt it was prudent to address this bogus claim.

In the report by a US-based portfolio manager their basic premise is that by investing in index based ETFs, investors are no longer doing fundamental analysis which is pushing up equity valuations, creating market inefficiencies and the potential for a major market decline. We disagree and here’s why:

1. Size of the ETF market
The ETF market has exploded in recent years with more investors turning to them and more players coming into the marketplace with new and innovative structures. Next week my partner Doug Rowat will discuss the downside of some ETFs (there are now ETFs with 4x leverage which are about as dangerous as President Trump with a termination letter).

Despite this explosion in popularity, ETFs still represent a small fraction of the overall market. Looking at the US markets there is currently US$16.3 trillion in mutual funds and only US$2.5 trillion in ETFs, according to the Investment Company Institute. Yes, ETFs as a percentage of total US investments has risen sharply from less than 1% in 2000 to 13% currently, but still it represents a small percentage of the overall amount. Therefore I think their impact on the overall market is being overstated.

Total US Mutual Funds and ETFs

Source: Investment Company Institute, Turner Investments

2. They own the same stocks
The key complaint about ETFs is that as new money flows into ETFs, they indiscriminately buy all stocks or bonds in the index, regardless of fundamentals. But all too often the active portfolio managers just end up buying the same stocks that are in the index, which in the biz we call “closet indexers”. These portfolio managers tend to be more worried about managing their careers (so they stay close to their benchmark index) than taking risks and making informed bets based on their market research.

Secondly, this belief assumes that portfolio managers can actually pick better stocks through their fundamental research and outperform the benchmark. But this is just not the case when looking at all active portfolio managers. For example, Standard & Poor’s recently analyzed actively managed portfolio managers around the globe and found that 98.9% of active US equity funds underperformed their benchmarks over the last 10 years.

So what’s the benefit of investing your money with active portfolio managers, who complete this fundamental analysis, and charge 2-3% fees, if they can’t beat the market?

3. Index investing is not new
Index funds are mutual funds that track an index, and have been around for decades. Index funds date back to the early 1970s with the introduction of the first index fund which tracked the Dow Jones Industrial Average. So this type of investing is not new and we haven’t seen index funds having a larger impact on the markets than traditional active mutual funds over this period. Selling is selling. What does it matter if it’s in an index-based ETF or an active mutual fund? Admittedly, you could make the argument that it’s easier to sell an ETF than a mutual fund given that it trades daily on an exchange, but if investors want to sell and reduce their equity exposure, I don’t believe owning an active mutual fund versus an ETF would cause investors to hold the investment longer and ride out the anticipated downturn.

Interestingly, there were also naysayers back then saying the same thing about the proliferation of index funds as they are saying now about ETFs. Below is a great quote from an analyst in 1975 claiming that index funds would lead to an inefficient market and with inflows driving stock prices with no fundamental consideration. Sound familiar?

Concerns of Index Funds Existed in 1975

Source: Bloomberg

4. Active managers justifying their poor performance
Finally, a lot of these protestations over ETFs sounds like sour grapes to me. Many investors and professional money managers have questioned this bull market and held large cash balances. This has led to significant underperformance and disappointing returns.

Case in point, the authors of the ETF report run a large equity mutual fund that has returned 4.3% annually over the last 10 years versus its benchmark at 7.7%, and 3.7% annually over the last 5 years versus their benchmark at 12.7%. Their weaker performance was in part due to their defensive positioning and high cash balance. Now it appears to me that instead of owning their decision to hold high cash balances and the weaker performance that resulted because of it, they are now blaming ETFs because, in their view, they are negatively impacting market dynamics.

I’ve been in this business a long time and have always tried to avoid taking shots at analysts and portfolio managers since I understand just how hard successful investing is. But that said, I’m not buying their argument that ETFs are leading to market inefficiencies and will cause a major market sell off. Maybe these portfolio managers should work a bit harder, uncover some value in the US equity markets, put that high cash balance to work and stop bemoaning the growth of the ETF space.

Ryan Lewenza, CFA,CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Vice President, Private Client Group, of Raymond James Ltd.

107 comments ↓

#1 good grief Ryan on 05.13.17 at 4:14 pm

‘These portfolio managers tend to be more worried about managing their careers (so they stay close to their benchmark index) than taking risks and making informed bets based on their market research.’

…….

the same can be said about ALL portfolio managers , including yourself.

but go ahead and trash your colleagues.

#2 Patrick M on 05.13.17 at 4:32 pm

Wouldn’t active managers like the generation of inefficiencies? Isn’t it their job to spot them and then make money off the difference?

#3 steerage steward on 05.13.17 at 4:45 pm

Not to be too technical, but buying the entire market regardless of fundamentals is the definition of inefficient.

As long as no more then 70% of the market is inefficient we will be fine.. That said, all my money is in index ETFs

#4 Smudgekin on 05.13.17 at 4:48 pm

Interesting read. All I know about 70s Wall Street is they are willing to forgive Nixon Watergate but NEVER the prices & wages freeze.

#5 smallcapsteve on 05.13.17 at 4:59 pm

Ryan,

Where do you think PE Ratios should sit given that interest rates today ain’t what they were 20 years ago, and never will be…..

I often hear the argument “the equity markets are overvalued, just look at the PE Ratios”….. But if a fair PE Ratio was 10 when interest rates were hovering between 8 to 20 percent, then if interest rates are between 0.25 to 4%, shouldn’t average PE Ratios be like over 30?

Would like to hear your thoughts….

#6 A box in the Sky on 05.13.17 at 5:06 pm

The ones who complain the most are the ones who make a living charging 2% MER’s on sh***y mutual funds.

They’re angry that their livelihood of skimming from people is being disrupted.

Fund fees are still way too high in Canada, although every year that goes by more people start wising up to this racket.

#7 Another Deckchair on 05.13.17 at 5:22 pm

@1 good grief Ryan

“the same can be said about ALL portfolio managers , including yourself.”

If it is like my line of work, some are smart, confident, and excel at their craft, others are not.

#8 Jungle on 05.13.17 at 5:29 pm

Those are some very alarming numbers (regarding underperforming!)

Wow. I would be so mad to have invested in those funds.

#9 Millennial-falcon on 05.13.17 at 5:47 pm

How could etfs cause a sell off when indexers only sell when they rebalance if at all?
Also is their and argument that if 50 % off markets were held in etfs that this would make the market very inefficient and hamper returns , what I mean to say is that if everyone indexed indexing wouldn’t work , it’s like it digging it’s own grave.

#10 Canadian fraud on 05.13.17 at 5:48 pm

http://www.zerohedge.com/news/2017-05-13/canada-hasnt-seen-bank-run-such-decades-finance-minister-wont-rule-out-home-capital-

#11 Mark on 05.13.17 at 5:58 pm

Good article on ETF paranoia. Of interest is that ETFs just haven’t grown that much in Canada, and nowhere near as much as in the USA. Guess Canadians are still “in love” with paying extravagant fees to mutual funds, largely sponsored by the big-5, to invest their money. Or worse, they just stick way too much money into fixed income products and savings accounts. Thus creating the ‘fuel’ for the housing bubble.

On that note, why the heck is Bill Morneau even entertaining any discussion of a HCG “bail-out”? Anyone reading his comments should be terrified of what’s likely happening “behind the scenes”. Just the mere talk of a bail-out implies that things are far worse than the public narrative is casting. He could very well be damaging whatever confidence remains in HCG and in the Canadian banking system.

#12 AK on 05.13.17 at 6:03 pm

“Investors are no longer doing fundamental analysis which is pushing up equity valuations, creating market inefficiencies and the potential for a major market decline.”
——————————————————————–
Perhaps, the complainers should change careers. They should become realtors in the Golden Horseshoe.

#13 Mark on 05.13.17 at 6:04 pm

“Where do you think PE Ratios should sit given that interest rates today ain’t what they were 20 years ago, and never will be…..”

Its my personal view that the US market responds poorly in a long-term rising interest rate environment. While the mix of Canadian stocks tend to outperform in a long-term rising rate environment. This is due to their sectoral exposure (ie: very little consumer consumption, and lots of long-term infrastructure investment in the Canadian indicies — while the US indices are loaded up with consumer and financial stocks that suffer in higher rate environments!).

So at this point, Canadian P/E ratios should be higher than US P/E ratios anticipating higher future growth.

However, if we look at the actual markets, we see quite the opposite.

I think Canadian-focused investors will have a fabulous future relative to ones focused on United States. Especially as the housing bubble pops, and capital starts flowing back to the TSX-listed stocks, particularly the indices, in a big way.

A simple ETF like XIU yields in excess of 5% these days, after tax, at a very weak time in the commodity cycle no less. You’d have to buy a GIC at 7% to even equal just the yield, nevermind the growth.

#14 OttawaMike on 05.13.17 at 6:09 pm

A Toronto advisor that I had and Fired told me he had never heard of I SHARES when I asked him about them in 2000. He also couldn’t tell me how he was being remunerated on the funds he sold me.
Said it was too complex.

He is a investment office senior manager with a Bridle path shack and at that time had a 150 million dollar portfolio.

So now tell me again how the financial industry is different than Realtors ..

You hired the wrong guy – a mutual funds salesman, not an advisor. Now you know better. — Garth

#15 OttawaMike on 05.13.17 at 6:11 pm

Oh yeah, after I went do it your self. It took me about 5 yrs to learn but I’m consistently at 6-7% per year vs the fund guy’s 2-3%.

#16 I'm stupid on 05.13.17 at 6:16 pm

The market is always inefficient, otherwise people like Warren Buffet wouldn’t exist. The bases of value investing looks for inefficiencies, things others miss to increase returns. That being said, it’s very difficult to beat the market and maybe less than 0.001 of a percent can do it over the long run.

#17 JRH on 05.13.17 at 6:20 pm

Thanks for the read !!

#18 espressobob on 05.13.17 at 6:33 pm

Glad to have made the switch to passive index investing using ETFs years ago.

Cheap, trade close to their NAV, pay yield, and no market timing required, except for the occasional profit skim. The major indices rock.

Mostly avoided inverse, levered, commodity & sector ETFs. Very risky and painful when your on the wrong side of the bet.

Mutual funds are a crap shoot. No thanks.

#19 Terry on 05.13.17 at 6:35 pm

Great article Ryan. I have been investing in ETF REIT`s, Bonds & Preferred indexes for years now and I`m still receiving solid steady returns. Since I have the money and fully understand the risks involved I still add a little speculating plays to my total portfolio by purchasing and holding individual dividend paying stocks and REIT`s. Overall I`m still enjoying 8.5%+ annual returns year after year.

#20 Ryan on 05.13.17 at 6:40 pm

Do they have any studies on financial advisory firms that money manage and exclusively use etfs ?

Less their fees , what % beat the index ?

I’d say it’s also that same 98.5% number …that do not .

#21 OttawaMike on 05.13.17 at 6:47 pm

Ottawa update:

Tired Carlington grandma’s house on my street. No landscaping, unfinished basement, oil furnace, 1200 sq. ft –sold in 4 days $15k over asking for $397k

Animal spirits are awakening in the sleepy Ottawa market.

Thanks GTA!

#22 Sean McNamara on 05.13.17 at 6:59 pm

Thanks Ryan, Interesting read.

All of our TFSA, RRSP’s and corporate funds are in a 60/40 balanced portfolio’ of ETF’s

We sold our house and plan to buy in 2 to 4 years.

Should the principal residence money be in the same balanced portfolio or since we have a shorter timeline should we be more conservative? like 80/20?

And if so, would it be something like..

Cdn Equity 5%
Cdn REIT 3%
USD Large Cap 7%
Ex NA 5%
Fed Bond $14%
Prov Bond %14
US Corp Bond 12%
Preferred Shares %40

#23 Fred on 05.13.17 at 7:02 pm

A simple ETF like XIU yields in excess of 5% these days, after tax

………

can you kindly provide a source for this? thanks

https://www.blackrock.com/ca/individual/en-ca/products/239832/ishares-sptsx-60-index-etf?nc=true&siteEntryPassthrough=true

#24 Joseph R. on 05.13.17 at 7:09 pm

You hired the wrong guy – a mutual funds salesman, not an advisor. Now you know better. — Garth

———————————————————-

Got some bad news, Garth. An advisor, with an “o”, is a mutual fund salesman, only an adviser, with an “e” has a fiduciary duty.

What’s in a vowel? :

http://www.cbc.ca/news/business/bank-s-deceptive-titles-put-investments-at-risk-1.4044702

Bunk. — Garth

#25 Newbie on 05.13.17 at 7:13 pm

Buying HXD ( the lowest during last 5 years) might turn to be a briliant move…

#26 daveyboy on 05.13.17 at 7:16 pm

90 percent of people have no clue what an etf is. I dont see a problem at all.

#27 dakkie on 05.13.17 at 7:17 pm

Canada’s Housing Bubble is Larger than that of the US Before 2008

http://investmentwatchblog.com/canadas-housing-bubble-is-larger-than-that-of-the-us-before-2008/

#28 Mark on 05.13.17 at 7:19 pm

“can you kindly provide a source for this? thanks”

Looks like you did provide the source in your link. The P/E ratio of XIU is approximately 20, so invert that P/E ratio and you get the earnings yield of XIU.

#29 NoName on 05.13.17 at 7:20 pm

Hello Ryan

what are your thoughts on those two etfs:
NYSE-HACK
NYSE-CIBR

NoName

#30 For those about to flop... on 05.13.17 at 7:39 pm

This one is not Pink Pollen, this time I will take a different approach.

This one is one of my old postings I showed people when they said prices in Coquitlam weren’t coming down fast enough back in the winter time.

Well I was cleaning up my folder today and decided to check in on the end result after they took 22% off to try and cash in since they were not recent buyers.

Well it looks like they did good, but the reason I am showing you this one is because it sold for 1.01m but was assessed at 1.41 and so the new buyer got it for roughly 40% less than assessed if my Chardonnay has not affected me too much yet…

M42BC

986 JARVIS ST Coquitlam

Oct 12:$1,348,888
Feb 1: $1,049,900
Change: – 298988.00 -22%

https://evaluebc.bcassessment.ca/Property.aspx?_oa=QTAwMDAzWE5GRQ==

#31 etf's on 05.13.17 at 7:54 pm

i do hold a few;

all in non-registered accounts;

hxs
zwe
zwh

all other holdings are 4-5 star mutual funds, d-series. All with a 5 yr sharpe ratio above its peers. They re-invest dividends . Etf’s do not. For sectors/specialty, mf’s over etfs for me (ex., small caps)

cibc offers a fantastic balanced product with a mer of .39. Minimum is $50,000. Of course, they rebalance for you

#32 Smoking Man on 05.13.17 at 7:57 pm

Ryan we missed you at blog dogapalusa today. WOW hundreds showed up today. It’s great to put faces to the blog dog posters. Lots of non posters there too.

Lots of drive by peeping Toms too. Don’t think I didn’t notice.

I met some realy nice people today. Turner Nation was a no show.

This should become annual tridition first Saturday after the Kentucky Derby. Belfountain.

#33 Tim on 05.13.17 at 8:09 pm

ETFs or dividend paying stocks will outperform must managers in the long run, regardless of how much they spend on their suits

But they will not reduce volatility, make you more tax-efficient or plan your retirement cash flow. It’s not all about annual return. — Garth

#34 Freedom First on 05.13.17 at 8:11 pm

#25 Newbie

HXD. Thanks. I agree. I just placed my order.

#35 Andrew Woburn on 05.13.17 at 8:17 pm

The risk I see in the major ETF’s in a market down draft is that they may not be able to cope in the short term with a wave of redemptions from panicky investors and have to dump a lot of holdings in a hurry at unfavourable prices. This effect would be very short term and would not affect the unpanicked who might buy the dip. Selling a few ETF’s is much quicker and perhaps more reflexive than dumping a portfolio of stocks so you could say ETF’s may amplify the result of a market panic.

Whether the potential impact on markets is any worse than we have already seen from algorithmic trading is debatable. I don’t see it as an argument against ETF’s.

#36 espressobob on 05.13.17 at 8:17 pm

One of the advantages of using a ‘fee based advisor’ is the simple fact they can protect an individual from themselves. Many of us didn’t have this luxury back in the day. We had a choice. Deal with a commissioned stockbroker or figure it out on our own. Some choice?

Online investing and ETFs are still in their infancy. This can be treacherous waters for newbies hooked on making a killing and lacking a basic understanding on how investing actually works long term.

This subject is incredibly boring anyways. DIY mistakes can leave one in a world of hurt. Besides, a one percent fee to build and maintain a portfolio is dirt cheap compared to the local brain dead bank staff or 200 dollar or 2% (whichever is more) people, and yes, mutual funds as well.

Hell, I wouldn’t have wasted time doing this if we had fee based advisors way back in the day.

#37 Freedom First on 05.13.17 at 8:19 pm

Ryan L

Thanks for the post. I agree.

Plus, I think the Fee you charge with Garth is a bargain for a one stop shop of looking after ALL of one’s financial affairs.

#38 Andrew Woburn on 05.13.17 at 8:22 pm

Mark on 05.13.1
On that note, why the heck is Bill Morneau even entertaining any discussion of a HCG “bail-out”?
========================

Let’s hope its not because he thinks bailing out HCG now is cheaper than eventually bailing out CMHC.

#39 mike from mtl on 05.13.17 at 8:26 pm

Mutuals do have their place however, since it is a much larger market.. there’s frankly too much choice in this area. From the confusing naming conventions, unclear & complex fees (loads) and misleading investment prospectus – it is no wonder the general populace has a mistrust to these.

Even myself am still forced to deal with them. Almost every job of late has some sort of forced group RRSP which invariably are a fixed crappy mutual of too much canadian crap, dubious returns and high fees. Man why can’t I simply just get a few passive index mutuals and I’d be happy? They exist.. why peddle these silly funds?

Pretty sure that it’s the institutional group investments and [email protected] that simply don’t know better who keep these things alive.

#40 NoName on 05.13.17 at 8:37 pm

@SM

now that you mention kentacky derby, i wonder what was blasting from his headphones.

http://imgur.com/a/7h31o

#photofinish

#41 Pete from St. Cesaire on 05.13.17 at 8:42 pm

whatever confidence remains in HCG and in the Canadian banking system.
———————————————–
Stop it! I’m laughing till it hurts.

#42 The Twenty Dollar Bill on 05.13.17 at 8:51 pm

Ryan, I thought you might find this article below amusing.

http://www.etf.com/sections/features/123.html

#43 espressobob on 05.13.17 at 8:59 pm

One of the biggest headaches with mutual funds is the correlation between the ‘unit price’ and the actual NAV. Demand for the latest outperforming fund manager or underlying sector/commodity drives up unit price.

Liquidity risk in high risk mutual funds can be another killer. There’s nothing worse holding a fund with positions in something no ones bidding on.

Panic can take over in a downturn driving the losses further. Nasty.

#44 Figmund Sreud on 05.13.17 at 9:01 pm

We disagree and ….
__________________________

Aha! … Are we seeing here a most vivid example of the pitchman’s tendency to present his product as, … say, “beautiful” and ^“great.” ( … forgive me, … you did mention Trump in your post, too. Yes?)

Anyway, … in the real world, one must understand that the top managers operate ( … are allowed to operate!) in a different value system, … a system where highest appreciation is given not to facts but to a less rigid set of judgments based on intuition and experience.

Such is particularly true ( … business truth!) when the subject is not simply a routine business but a business entailing investment activity, … be it formulation and flogging of mutual funds, ETF units, … or simply financial advisement business.

Best,

F.S. – Comox, BC.

#45 Walter Safety on 05.13.17 at 9:06 pm

ETF investors don’t own anything other than a bet on the direction of the underlying index the ETF is trying to mimic. Then there is always the disclaimer on the ability of the ETF to actually reflect the index.
Investors in mutual funds have ownership in the underlying shares. Likewise segregated funds from lifeco’s .
When Confederation Life went into receivership seg fund investors were paid out pronto,within weeks at 100% because they owned the shares.
In the 1987 crash little old ladies who remembered the Great Depression were running into stock brokerages asking for their stock certificates .
Ownership matters- a lot.

#46 Ryan Lewenza on 05.13.17 at 9:06 pm

smallcapsteve “Ryan, Where do you think PE Ratios should sit given that interest rates today ain’t what they were 20 years ago, and never will be”

I think right about here. Everyone is saying the market is very overvalued but I think given where interest rates are we’re fairly valued. Currently the S&P 500 trades at 21x trailing and 18.5x forward earnings. That’s at the high end of their historical range but given the low interest rates and inflation I’m not too worried. Now if the Fed aggressively hikes interest rates, then we have to be worried. – Ryan L

#47 Gentle ,Loving Kindness on 05.13.17 at 9:27 pm

#25 Newbie on 05.13.17 at 7:13 pm
Buying HXD ( the lowest during last 5 years) might turn to be a briliant move…

HXD.T has bounced twice off of the $6.36 “support”. I would wait until it gets through at least $7.00 to confirm a trend reversal before buying.

#48 Smoking Man on 05.13.17 at 9:28 pm

Ryan your post was informative but boring as shit. No personal touch. No humor. Very dry.

Laziness I’m thinking. Or too busy multi tasking.

Altho I see you have a few celebrity worshipers on here. I ain’t one of them. Nothing beats my mirror.

Yes it’s past 9pm.

#49 BS on 05.13.17 at 9:31 pm

Case in point, the authors of the ETF report run a large equity mutual fund that has returned 4.3% annually over the last 10 years versus its benchmark at 7.7%, and 3.7% annually over the last 5 years versus their benchmark at 12.7%.

Hilarious. I bet they failed to mention that in their report.

#50 Mark on 05.13.17 at 9:42 pm

“The risk I see in the major ETF’s in a market down draft is that they may not be able to cope in the short term with a wave of redemptions from panicky investors and have to dump a lot of holdings in a hurry at unfavourable prices. “

An ETF “redemption” is merely trading the ETF units for baskets of stocks that are in the underlying ETF.

If an ETF trades beneath NAV, an arbitrageur will buy ETF units, redeem them for stocks, and then sell the stocks.

If an ETF trades above NAV, an arbitrageur will buy stocks, exchange them for ETF units, and then sell the ETF units.

In the real-time marketplace, the arbitrageur can do this in mere minutes and earn a profit from differences between NAV and the actual trading price.

Hence, ETFs don’t often drift much from NAV before this sort of arbitrage takes place. Its pretty much risk-free profit for the trading desks and pension funds that engage in such.

#51 Mark on 05.13.17 at 9:47 pm

“ETF investors don’t own anything other than a bet on the direction of the underlying index the ETF is trying to mimic.”

For most ETFs, this is untrue. The major Canadian ETFs, such as XIU, XIC, VCN, etc., are legally mutual fund trusts that directly own the underlying assets and, as flow-through entities, directly pass on the income attributable to the underlying assets to unitholder/beneficiaries. These assets are held by a custodian on behalf of the ETF.

There’s some exotic ETF structures based on OTC swaps or derivatives. I personally advise people avoid them at all costs and stick to the ones that do hold the underlying shares.

#52 Smoking Man on 05.13.17 at 9:58 pm

Charlie don’t surf.

When Trump cuts corp tax and income tax. Cad bonds will be crushed. Animals chasing yeild, Usa equtitys to the moon. Cad real estate in the shitter Because everyone will be selling cad bonds for usa equities.

That’s how Ryan should respond to chirps about over valuations.

Ryan I’m out of work. Probably because I have no work ethic. Putting out a resume requires a few thumb clicks. I can do thumb. Sucking up to pepole vastly more stupid than me. It’s wall for me.

Let me ghost write for you. Give me a few sentences tucked in between your boring logic will make you a star.

https://youtu.be/30QzJKCUekQ

#53 crowdedelevatorfartz on 05.13.17 at 10:12 pm

Excellent article Ryan.
i’m just curious.
Since ETF’s are essentially “slices” of various companies….
How often would you re-look at the ETF’s you’ve invested in for your clients and continue to hold or make a change? Daily?Once a month? each quarter? semi annually?

#54 Some More EMH Articles on 05.13.17 at 10:12 pm

These two articles are worth a read!

http://www.cbsnews.com/news/efficient-market-thinking-is-inefficient/

http://www.newyorker.com/magazine/2009/05/11/how-david-beats-goliath

#55 Newbie on 05.13.17 at 10:14 pm

#34 Freedom First

My pleasure

#56 Smoking Man on 05.13.17 at 10:16 pm

Had bit of LSD before blog dogapalusa. I’m a pro no one will notice.

Noname I think you came with your kid. He dropped his ice cream. What beauty. I feel your pain and joy.

He’s perfect. Never sell yourself short being an Electrical dude. Your still alive. I change a light bulb and I’m tosed 4 feet away.

#57 Basil Fawlty on 05.13.17 at 10:17 pm

Speaking of the S&P 500, David Stockman wrote today that since March 1st the FAANG stocks are up $200B, while the remaining 495 stocks are down the same amount.
So, here are the PE ratios for those 5 stocks:
Facebook 37.7x, Amazon 180.1x, Apple 18.3, Netflix 211x, Google 30.8x.

Add in 1st quarter GDP of .7%, massive retail closures, huge increases in new auto inventories, foreclosures rising, rising student loan defaults and job numbers that indicate hospitality as the largest growth segment.

Do you think ETF’s have priced any of this in yet?

#58 crowdedelevatorfartz on 05.13.17 at 10:20 pm

@#48 Smokey the Sober Grump
“boring as shit. No personal touch. No humor. Very dry.”
******

Really?
You were expecting Chris Rock?
On a financial advice blog?

Personally I got a chuckle out of this…..
“as dangerous as President Trump with a termination letter….”

but thats just moi.
Take a pass on the JD and go directly to the Peach Schnapps….the extra sugar should wreak havoc with your delirium tremens

#59 blacksheep on 05.13.17 at 10:21 pm

Don # 92,

“Your assumptions are truly amazing…maybe he rents.”

“Go stick your head in your wool! I like the service he provides…prove him wrong. Stop playing happy asshole!”
———————————————-
I’ve always had, no name calling, respectful convo with flop, which is more than I can say for you.

Of course he rents, as I bet you do too…
There, have some asshole, sans the happy.

#60 Newbie on 05.13.17 at 10:28 pm

#47 Gentle ,Loving Kindness

HXD.T has bounced twice off of the $6.36 “support”. I would wait until it gets through at least $7.00 to confirm a trend reversal before buying.
—–
It’s just a very good hedge once the things do go sour. I’ve just checked the chart back to 2008-2009, it peacked at above 73 in November 2008 and then again above 70 in early 2009…

#61 For those about to flop... on 05.13.17 at 10:29 pm

Hey Don,do you remember this old case we talked about a few months ago?

It seems like they got out o.k and made a little bit of money after expenses.

I guess now is as good as time as any to thank you for trying to stick up for me the other day.We all have different views on things that’s why this blog can be so interesting.

Thanks also should go out to Braj ,April and Crowdie for the kind comments and encouragement…

M42BC

6172 Dennie Lane, Nanaimo

Nov 11:$474,900
Jan 20: $439,900
Change: – 35000.00 -7%

https://evaluebc.bcassessment.ca/Property.aspx?_oa=RDAwMDA0TkxNRw==

#62 ANON on 05.13.17 at 10:30 pm

First principle of finance:
One must trust the future will be brighter (the collective narrative), in order to make a promise mathematically and logically impossible to keep (a loan).

Second principle of finance:
The interest on the loan must not exist for the loan to be perceived as valuable, while the first principle is in place.

For the effects, both good and bad (in moral vs mathematical terms), see periods of expansion and contraction, AKA booms and busts throughout the history since the abstraction of real things into tokens has emerged.
For the graphical representation of the current situation, see Exter’s pyramid, and try to locate ETFs’ place in the pyramid.

.

#63 Smoking Man on 05.13.17 at 10:37 pm

When you pick a side.

https://youtu.be/eJlN9jdQFSc

#64 Smoking Man on 05.13.17 at 10:41 pm

Happy Mothers day babe.

https://youtu.be/mIBTg7q9oNc

#65 Financial Freedom at Forty on 05.13.17 at 10:59 pm

Re #29 NoName
what are your thoughts on those two etfs:
NYSE-HACK
NYSE-CIBR
————–
Super niche, reacts to news. May be better to invest directly – have owned HACK since 2015 as was too lazy to try and pick ’em, and the space is richly valued. What liquidity too, you need critical mass for ETFs to survive. Higher expenses.

Bought PBI-T at the same time and its been more rewarding and informative (watch the holdings).

Enjoyed lunch in Belfountain, loaded potato soup was tasty, drive very scenic, dogs amusing.

#66 conan on 05.13.17 at 10:59 pm

I disagree and think that ETFS do distort. Securities and paper that a fund manager will not buy will make it into an ETF line up. ETFs are a bankster’s wet dream. It is an ideal place to put unwanted paper, and it does create a false demand. We dont see the inefficiency yet because the markets are all artificial . Do not forget that QE came for dinner, and never left.

ETFs are good until they are proven not to be good. Now they look good, but only because of QE and artificial markets.

Buy and hold is a disaster. You would get killed with Nortel. How soon peeps forget.

#67 Linda on 05.13.17 at 11:12 pm

Ryan, your question at the end of statement #2 answers itself. Obviously there IS no point (other than supporting another person’s lifestyle) in giving your funds to managers who 1) can’t beat the market & 2) charge you for the privilege of under performing on your behalf. What ETF’s can do is give an investor a decent rate of return & for far less cost than many market portfolio managers will charge.

#68 Smoking Man on 05.13.17 at 11:14 pm

To all dogs

https://youtu.be/YrLk4vdY28Q

#69 Balmuto on 05.13.17 at 11:26 pm

#50 Mark on 05.13.17 at 9:42 pm
“An ETF “redemption” is merely trading the ETF units for baskets of stocks that are in the underlying ETF.

That made absolutely no sense.

#70 NoName on 05.13.17 at 11:30 pm

Interesting read.
Does it get any more [email protected]$-+$ than this, non compete for working stif…

https://www.nytimes.com/2017/05/13/business/noncompete-clauses.html?_r=1

When a noncompete agreement is litigated to the letter, a worker can be barred or ousted from a new job by court order. Even if that never happens, the threat alone can create a chilling effect that reduces wages throughout the work force.

“People can’t negotiate when their company knows they won’t leave,” said Sandra E. Black, an economics professor at the University of Texas at Austin.

#71 Rich Young on 05.13.17 at 11:44 pm

CHOOOSE YOUR ALTERNATIVE INVESTMENT HERE:
1. dead retail
2. dead malls c.reits
3. housing bubble
4. dieing energy
5. technology bubble of non profit companies
6. low manipulated rate savings account

This world is a giant bubble and when it pops it is going to get super ugly…

#72 fishman on 05.14.17 at 12:22 am

Would have liked to be there. The two scoop guys on one side of the porch. The one scoopers on the other.

#73 Mark on 05.14.17 at 12:27 am

“CHOOOSE YOUR ALTERNATIVE INVESTMENT HERE:”

Plenty of very highly profitable and sustainable companies in the Canadian indices. Railways. Telecoms. Etc. Not at bubble valuations either. In fact, the TSX index, with most of its cyclicals closer to the bottom of their respective cycles than the top, is priced at 20X trailing earnings. With the sort of earnings growth seen since the 2015-2016 slump, present earnings are likely in the 15X area.

“An ETF “redemption” is merely trading the ETF units for baskets of stocks that are in the underlying ETF.
That made absolutely no sense.

Well, let’s use the example of XIU, Canada’s largest ETF. It holds the 60 companies of the TSX60 index.

To “create” a unit of XIU, a market participant takes a portfolio of those 60 stocks to BlackRock (the ETF sponsor), and exchanges those 60 stocks for an equivalent number of XIU units. Thus ‘creating’ an ETF.

When a market participant wants to ‘redeem’ XIU units, they take XIU units to BlackRock, and they’re given a portfolio of 60 stocks in return. Thus ‘redeeming’ an ETF.

This activity, that of creating and redeeming ETFs, takes place electronically continuously by market participants to keep the ETF trading near NAV.

Pension funds, which have large portfolios and trading ‘inventories’ of the 60 stocks that make up the XIU ETF are the most common participants in this activity. The traders able to make riskless profits when they detect that the ETF is trading at a price materially different than NAV.

#74 Victor V on 05.14.17 at 12:33 am

Well, I was one of those who attended blog dog paluzza at Belfountain…enjoyed chatting with everyone.

Garth, you run a classy place and my family stayed for the rest of the day listening to the musician in your parlour, whilst snacking on sandwiches and ice cream.

Smoking Man…almost didn’t recognize you without the Walmart flip flops. Stay cool, my new friend.

#75 Mark on 05.14.17 at 12:38 am

“Interesting read.
Does it get any more [email protected]$-+$ than this, non compete for working stif… “

Just another sign of the times, that the labour market is nowhere near “full employment”, and employers can get away with such stupidity. The clauses might be questionable in terms of their legal enforceability or even morality, but the fact that people are signing or are asked to sign such contracts indicates a major imbalance in the bargaining power between labour and management. Only the delusional believe that the employment situation is good these days.

ETFs are a bankster’s wet dream. It is an ideal place to put unwanted paper, and it does create a false demand.

Have to disagree here. ETFs generally follow fairly rigidly set indices with criteria that is set forth fairly clearly. ETF managers have very little flexibility in their mandates and cannot merely, “willy nilly”, go out and buy assets outside of a specific index mandate. Its certainly possible that some junk makes it into the indices, but sometimes companies are labelled as ‘junk’ not because of the failings of management, but rather, the simple fact that they operate in an out of favour industry, region, etc. Diversification to cyclically out of favour geographies, sectors, and companies is important as such entities often do come back into favour with time and outperform. Except when it comes to index rebalancing, ETFs generally do not trade in the markets, so they are not exposed to the problems that traditional mutual funds suffer with their trading strategies such as front-running and the difficulties of acquiring large numbers of shares in a short period of time.

#76 Welcome to Slurrey on 05.14.17 at 12:43 am

Sitting with the parents and inlaws …………. housing always goes up is their mantra …………… i argue the logic but unfortunately in current times they are correct ………….. when will they be wrong ? If rates stay where they are , im thinking never

#77 acdel on 05.14.17 at 1:00 am

For me personally, this was a very interesting article, thanks.

#78 BC_Doc on 05.14.17 at 3:01 am

@Ryan L says:

“3. Index investing is not new
Index funds are mutual funds that track an index, and have been around for decades. Index funds date back to the early 1970s with the introduction of the first index fund which tracked the Dow Jones Industrial Average.”

*********************************************

“Bogle’s folly” turned 40 last year:

http://jasonzweig.com/birth-of-the-index-mutual-fund-bogles-folly-turns-40/

And more on the first index mutual fund by its creator, Saint Jack Bogle himself:

https://www.vanguard.com/bogle_site/lib/sp19970401.html

#79 Ronaldo on 05.14.17 at 6:06 am

Here is one ETF that became to successful for its own good.

http://www.pinnacledigest.com/tsx-venture-investing/gdxj-etf-rebalance-coming/

#80 Ronaldo on 05.14.17 at 6:27 am

Two etf’s that hold most of Canada’s best stocks.

http://www.tsinetwork.ca/daily-advice/etfs/canadian-etfs-hold-canadas-stocks/

#81 Ronaldo on 05.14.17 at 6:53 am

This is what Robert Gill of the Globe and Mail was saying about HCG back last December. Wonder what he is saying now.

http://www.theglobeandmail.com/globe-investor/investment-ideas/us-hedge-funds-make-bets-against-canadas-home-capital-group/article33438764/

This is what he was saying about it 4 years ago:

“Home Capital is a smart lender,” said Robert Gill, fund manager at Aston Hill Financial Inc. which manages C$6.7 billion, including Home Capital. “They don’t care about a person’s history. They care about the real estate value. They know the value of every house on every street they lend to in detail.”

Gill is overweight Home Capital stock. “They’re taking over market share from competitors,” he said in Toronto. “And they can easily grow it further.”

And this is how is stock in Aston Hill is performing. Check out the 5 year chart.

https://www.google.ca/search?q=aston+hill+financial+stock&ie=utf-8&oe=utf-8&gws_rd=cr&ei=GTYYWdqRG4L8jwPGn6HgBg

So much for analysts.

#82 Ronaldo on 05.14.17 at 7:12 am

Etf’s with exposue to HCG.

http://www.capitalcube.com/blog/index.php/etfs-with-exposure-to-home-capital-group-inc-february-14-2017/

#83 Wrk.dover on 05.14.17 at 8:03 am

So Mark…the 150 year old railways are a great buy you say? Deferred maintenance and all other corners having been cut since Iacocca invented corporate austerity and then stock price is up 400% in the past six or seven years, on what grounds. How many rotten wooden ties are there, from one coast to the other? Walk it and see, then get back to me.

And the future growth in the business is ?

I am starting to see why most of the comic con blog dogs here dis you so often.

#84 jess on 05.14.17 at 8:26 am

Robinhood Markets Inc. is a U.S. based financial services company headquartered in Palo Alto, California. The company offers the Robinhood smartphone mobile app, which allows individuals to invest in publicly traded companies and exchange-traded funds listed on U.S. stock exchanges without paying a commission.

=============

open market repurchases
Rule 10b-18
The Problem with Stock Buybacks
Why high corporate profits aren’t translating into widespread economic prosperity, as explained in William Lazonick’s HBR article, “Profits Without Prosperity.”
https://hbr.org/video/4102770682001/the-problem-with-stock-buybacks
https://hbr.org/2014/09/profits-without-prosperity?referral=00060

Harvard Business Review.

William Lazonick is a professor of economics at the University of Massachusetts Lowell, the codirector of its Center for Industrial Competitiveness, and the president of the Academic-Industry Research Network. His book Sustainable Prosperity in the New Economy? Business Organization and High-Tech Employment in the United States won the 2010 Schumpeter Prize.

#85 Ryan Lewenza on 05.14.17 at 8:31 am

Sean McNamara “We sold our house and plan to buy in 2 to 4 years. Should the principal residence money be in the same balanced portfolio or since we have a shorter timeline should we be more conservative? like 80/20?”

Yes exactly right. Since you may draw on these funds over the next few years you can’t take on much risk so an 80/20 is more appropriate. In these instances for clients we build a boring bond focused portfolio using ETFs like Vanguard Short-term Bond ETF, iShares Corporate Bonds, some REIT and pref exposure (40% is a little high) and some TSX/S&P 500 equity exposure. We’re still bullish but you never know when that next bear market can strike so if you may need that money, it needs to be more conservatively invested. – Ryan L

#86 Livin Large on 05.14.17 at 8:32 am

“It’s not all about annual return. — Garth”

That’s the truest statement I’ve seen in ages. ROI is effectively meaningless although still a benchmark. What you keep at the end of the day is really the only metric I care about. Paying an advisor or adviser to be average on ROI isn’t what I personally am paying for. It’s the other less tangible skills I am really paying for.

Structuring for maximum tax avoidance etc is something that, in my case, I don’t have the skill set to be handling on my own. Sure I can read the coach potato plans and strive for “average” returns or even above average returns but there is sooooooo much more to understand about money management than just ROI.

For me it’s the same as DIY home renovations, sure I “can” do it myself but I can just as easily screw it up myself.

#87 Ryan Lewenza on 05.14.17 at 8:36 am

NoName “Hello Ryan, what are your thoughts on those two etfs: NYSE-HACK and NYSE-CIBR”

We can’t comment on specific securities but I’m bullish on cyber security and see it as a great long-term trend and investment opportunity. Also HACK’s chart looks pretty good to me. – Ryan L

#88 Ryan Lewenza on 05.14.17 at 8:42 am

Freedom First “Ryan L, Thanks for the post. I agree.
Plus, I think the Fee you charge with Garth is a bargain for a one stop shop of looking after ALL of one’s financial affairs.”

Thanks and we couldn’t agree more. We feel our 1% fee is very fair and it includes money management, tax advice, financial planning and even marital advice and and counselling. Some days its more of the latter and less about investments. It’s always interesting at Turner Investments. – Ryan L

#89 Ryan Lewenza on 05.14.17 at 8:49 am

crowdedelevatorfartz “How often would you re-look at the ETF’s you’ve invested in for your clients and continue to hold or make a change? Daily?Once a month? each quarter? semi annually?”

Well we’re monitoring the markets and portfolio every day, but we make changes to the portfolio and rebalance at least 1-2 times per year. Generally our portfolio turnover is low say 20-30% per year, and then we rebalance the account a few times a year. If it’s a very volatile and challenging year we may do more trades and rebalancing. – Ryan L

#90 Dwight McCambridge on 05.14.17 at 9:31 am

Ryan, a few weeks ago you were bullish on Oil to the latter part of the year. Do you still have that thesis intact or are you more neutral now on your call for Texas Tea?

#91 Tony on 05.14.17 at 10:03 am

Great post Ryan.

#92 Doug in London on 05.14.17 at 10:42 am

1) Looking at the US markets there is currently US$16.3 trillion in mutual funds and only US$2.5 trillion in ETFs.
2) “ETFs are ‘weapons of mass destruction’ that have distorted stock prices and created the potential for a market selloff.”
—————————————————————
1) What’s happening is ETFs are replacing mutual funds as a place to invest and get diversity. That totally makes sense, considering the lower MER (manage expense ratio) of ETFs.
2) ETFs causing a market selloff? What rubbish! Market selloffs have always occurred, long before ETFs and mutual funds came along. So what, exactly, is wrong with market selloffs? When I put the words market selloff into Google Translate what do I get? Buying opportunity!

#93 Doug in London on 05.14.17 at 10:56 am

@Ronaldo, post #81:
I read the Globe and Mail business section myself and, while I read a lot of good informative articles there, I also read a lot of rubbish. One day I read an article on one page and read one on another page that said the exact opposite so don’t take everything there as the gospel truth. Try to get information from many different sources and, above all, use some common sense.

Similarly, if every article in the G&M is ranting and raving about how great some investment is and you have some, it’s time to sell off some or all of it. Likewise, if in every article there is bellyaching and crying about how bad some investment is (like on this blog) it’s time to buy some.

#94 The Technical Analyst, CSTA, CPD on 05.14.17 at 11:29 am

ETFs ARE WMDs

Why is Ryan Lewenza wrong?

I was just talking about this issue with other financial advisors and there IS a possibility of systemic risk in the ETF market.

The ETF industry is highly complex with more and more complex products coming on to the market each month. Remember the MBAS (Mortgage Backed Asset Securities) risk in 2008? MBAS’ were so complex that investors bought into the “return” without seeing the risk (or understanding the product).

So why are ETFs WMDs?!

1. They only FOLLOW the index/sector
2 There is NO DOWNSIDE protection. NONE at all for investors.
3. Each bank/investment house is creating more and more complex ETF’s to attract money.

ETF’s are not a bad product, but like MBAS’ you NEED to understand their RISK and their DOWNSIDES.

#95 crossbordershopper on 05.14.17 at 11:49 am

people should pay nothing for fee’s for banking fee and for investcement advice. millionaires stealing from little people. you should be ashamed of yourself. yes make enough to feed yourself and regular income but when you see brokers making 400 to 500 grand, you gotta shake your head.
no fee banking and trade for 5 bucks yourself, or buy etf for trivial fee. these brokers and advisors with their graphs and charts like really how hard is it to manage shares in loblaw or telus like really.
and the best are the fund of funds. like bank funds owning other bank funds or investor groups doing the same, double dipping, what blatent scamming of the little people

#96 Figmund Sreud on 05.14.17 at 11:55 am

Pertinent to this thread:

These three firms own corporate America
http://www.atimes.com/article/three-firms-corporate-america/

“A fundamental change is under way in stock market investing, and the spin-off effects are poised to dramatically impact corporate America. ….

… since the financial crisis of 2008, investors have shifted to index funds, which replicate established stock indices, such as the S&P 500. ….

The fast-growing index sector … is highly concentrated. It is dominated by just three giant American asset managers: BlackRock, Vanguard and State Street ….

… the Big Three, taken together, have become the largest shareholder in 40% of all publicly listed firms in the United States. ….

… who knew?

Best,

F.S. – Comox, BC.

#97 re.,The Technical Analyst, CSTA, CPD on 05.14.17 at 11:57 am

yup. The Boom in etf’s and constant new products tells you all ya need to know.

we are in the 2nd largest bull market in history. A president who is borderline nuts, sovereign debt rising everywhere, housing bubbles, student loan bubbles, gross rise in the cost of education…..history always repeats itself. And when the correction comes, look out for these equity etfs. In 2015 XIC lost more than an average Cdn equity MF y a whopping 2%. Emotion can take can take over and ‘sell sell sell’ !!

but ,…….. they have lower mer’s…….:)

#98 open heart on 05.14.17 at 12:21 pm

Buffalo church is shielding undocumented immigrants and helping them escape to Canada

http://www.businessinsider.com/undocumented-immigrants-sanctuary-church-pilgrim-st-luke-el-nuevo-camino-buffalo-2017-5

#99 Blacksheep on 05.14.17 at 12:35 pm

Flop,

I tried asking honest questions to understand your motivation/rational, but you and others took it as trolling.

That’s unfortunate…I thought I read in the past you owned your home, was not tying to be a dick (to Don yes, but not you)

While I still think your sampling logic (Pink Pollen) to be seriously flawed, I 100% support your right to state your opinion publicly, on this forum.

I came here back in 2008/2009, A serious RE Bear to the point of selling and renting for 5 years, but time and life experience has changed my perspective.

The main reason I stay, is Garth’s acceptance of free speech and the wealth of knowledge he and the dogs provide ongoing.

Keep posting your reports, I will read them and draw my own conclusions, in private…

#100 JSS on 05.14.17 at 12:38 pm

I am a dividend growth investor. I like blue chip companies with low payout ratios, annual dividend increases, and low beta, which can act somewhat like bonds. Think: RY, BCE, FTS, CU, Telus, McDonalds, Cdn Tire, Saputo, for example. what I don’t like about ETFs is that when the underlying stocks increase their dividends, the distributions in the ETF don’t necessarily increase correspondingly.
Yes I purchased several individual stocks, but have held all of them for a decade now. Its not necessarily an approach for all investors, but I am very happy with the results, and have seen good growth in both distributions and capital growth since 2007.

#101 Old Dog on 05.14.17 at 12:50 pm

#95 crossbordershopper

“people should pay nothing for fee’s for banking fee and for investcement advice. millionaires stealing from little people.”

Sorry, can’t agree with you. The only fees you may get at the bank are minimum account fees. The majority of other fees are self inflicted.

As far as investment advisors being millionaires stealing from little people, what nonsense. Taking Garth for example, a 1% fee is very reasonable. Nothing is free in life. I’m sure you don’t work for free. I’ve found with over 40+ years of investing that a good financial advisor is worth their weight in gold. I would suggest you try it, you might enjoy the benefits of it.

#102 TurnerNation on 05.14.17 at 12:54 pm

#71 Rich Young some retail’s for sure going online.

For example. Leon’s furniture (on TSX) closed its downtown Toronto location near condos – it was in the Roundhouse across from Skydome.
People in my condo instead order furniture from Wayfair.ca /.com which is listed in the USA, stock symbol ‘W’.

My Millennial co workers order everything even household goods/supplies via Amazon! That leaves Dollarama for the rest of us.

They always can turn dead malls into retirement homes, or share space for Millennial serfs, or even into Prisons.

M41ON

#103 TurnerNation on 05.14.17 at 1:35 pm

Speaking of online shopping look at Shopify (punching super highs). Ditto Wayfair.
But this week I’m looking at buying kaputs on it – SHOP.US

#104 Walmartions on 05.14.17 at 5:23 pm

God bless them

#105 traderJim on 05.14.17 at 5:57 pm

#95 crossbordershopper

“people should pay nothing for fee’s for banking fee and for investcement advice. millionaires stealing from little people”

People are perfectly able to pay nothing for banking fees and investment advice. Please go right ahead.

What I think you might mean to say is “Other people should supply me with what I want for free, just because I say so”

Stealing in most cases (other than fraud) involves the use of force. No one is forcing you to pay anyone anything, except in the case of the government forcing you to pay taxes.

I suppose you also feel you have a right to (meaning someone else should pay for and supply your) healthcare, housing, food, transportation, employment, etc etc ad nauseum.

Better hope the people supplying all your ‘rights’ don’t decide to go on strike one day.

#106 James Kook on 05.14.17 at 6:05 pm

“Concerns of Index Funds Existed in 1975”

Thank you for that brilliant prediction from 1975.
She predicted exactly what is happening now.

There is less and less correlation between a company performance and its stock price.

The stocks’ prices are driven mostly by news (including the fake ones), by tweets, by rumors and manipulations.

Why bother analyzing a balance sheet, if a single google news can turn the market’s sentiment into opposite direction, as well as change algorithmic behavior of countless software programs.

#107 The Whole Truth on 05.14.17 at 11:37 pm

A recently published report on ETFs has been making the rounds with its doomsday prediction that “ETFs are ‘weapons of mass destruction’ that have distorted stock prices and created the potential for a market selloff.”

– – –

Translation:

The banking industry is taking a shitkicking in sales because they can’t sell overpriced mutual funds (active or passively managed) at overpriced commission rates like they used to for decades. So they take potshots at the cheaper alternative ETF’s in the media and try to scare the stupid sheep back into the Mutual Fund fold, that pays the agents, fund managers, and/or salesperson continuous commissions every month.

If you bought a house, how would you like to pay a fee to your realtor every year after that, for as long as you owned the place? How about another fee to the owner of the realty company they work for as well? NO?

That’s essentially what happens when you buy most mutual funds.