Hey everyone and welcome back to the deep dive.
Today we are gonna be taking a deep dive into ETFs.
Exchange traded funds.
Yes, ETFs, exchange traded funds.
And we've got a really great podcast episode
that we're gonna be breaking down today.
So by the end of this deep dive,
you're gonna be an ETF pro.
Absolutely.
No more confusion, no more jargon.
That's right.
Just straight understanding.
Yeah.
So if you've heard of ETFs,
but you've never really understood
what they are, how they work,
then this is the deep dive for you.
That is.
Let's jump right in.
Let's do it.
Okay, so the podcast we're looking at today
describes an ETF as a basket of assets.
What does that even mean?
It's a good analogy actually
because it really gets to the heart
of what an ETF is all about,
which is diversification.
So with a single ETF,
you're not just investing in one company stock,
you're investing in a whole bunch of them.
You know, maybe it's across different sectors
or different countries even.
So instead of putting all your eggs in one basket,
you're kind of spreading them out a little bit.
Exactly.
And that's the beauty of it.
Okay, I like that.
Now the podcast we're listening to also mentioned
that ETFs trade just like stocks,
which is different from mutual funds,
which are priced only once a day.
Right.
They use this analogy of a stock market buffet.
I love that.
Yeah.
Yeah, because with an ETF,
you can pick and choose what you want
and when you want it.
You're not limited to just the end of the day prices
like you are with a mutual fund.
So it gives you a little more control.
Much more control.
Yeah, okay.
And flexibility.
Especially if you're somebody who likes
to kind of actively trade.
Exactly.
If you like to be in and out of the market
and react to news and events,
then ETFs are perfect for that.
You got your finger on the pulse.
You got it.
Now let's talk about something that I know everybody loves
and that is low fees.
Everyone loves low fees.
The podcast we were listening to,
they made this funny comment about fancy suit wearing people
charging high fees.
But ETFs really stand out because they're known
for being cost effective.
Yeah, they are.
And that's a huge advantage.
It's not just about being cheap.
It's about keeping more of your hard earned money
working for you.
Because those fees can really add up over time, right?
They absolutely can't.
It's like a silent drain on your returns.
It's like a little hole in your pocket.
Yeah, exactly.
Okay, so low fees, that's a big plus.
Big plus.
Now to really understand the power of these low fees,
we need to go back to that basket of assets idea.
Yes.
And talk more about diversification.
I love that they use this dinner party analogy.
Oh yeah, that took good one.
Yeah, they were saying you wouldn't serve the same dish
to everyone at a dinner party.
Because you don't know what their dietary needs are.
Right, some people might be vegetarians,
some people might be gluten free.
Exactly, so you offer a variety of options.
A buffet of choices.
A buffet of choices, just like our ETF buffet.
Exactly, and that's what diversification is all about.
Okay, so you're spreading out your risk,
you're not putting all your eggs in one basket.
Exactly, and you're doing it in a way
that's managed by professionals.
So you don't have to be an expert
to build a diversified portfolio.
You know, you can leave that to the experts
who design the ETFs.
So it takes the pressure off.
It does, it really does.
Now let's tackle something that can be
a little bit confusing, taxes.
Yes, taxes is always a fun topic.
Always a fun topic.
The podcast briefly mentioned how ETFs
can be more tax efficient than other types of investments
because of their in-kind structure.
I'll be honest, I don't even fully understand
that in-kind thing.
It is a bit jargon-y, isn't it?
It is a bit, yeah.
Can you break it down for us?
Sure, so basically the way ETFs are structured,
they minimize the taxes you have to pay
when you sell them for a profit.
It has to do with how they buy
and sell the underlying assets.
So it's a bit complicated,
but the good news is it's working in your favor.
Okay, so even though it's complicated,
it's actually a good thing for us.
It is a good thing you get to keep more of your money.
I like the sound of that.
Me too.
Okay, so we've got diversification,
we've got low fees, we've got tax advantages.
What else is there?
Well, let's not forget about liquidity.
Yes, liquidity.
The podcast used this great analogy
of searching for your car keys.
You want them to be there when you need them, right?
I don't want to be scrambling around.
Exactly, and with ETFs,
you have that same kind of easy access to your money.
Because they trade on the stock market,
just like individual stocks.
Right, so you can buy and sell them quickly and easily.
It gives you the flexibility to react
to whatever's happening in the market or in your life.
Exactly, you're not locked in.
I like that.
So you can get some freedom.
Freedom.
And control.
Okay, so we've covered a lot of ground here.
We've talked about diversification, low fees,
tax advantages and liquidity.
It sounds like ETFs really have a lot to offer.
They do, they're a fantastic tool
for investors of all levels.
All right, well, let's take a quick break.
And when we come back,
we'll delve even deeper into the world of ETFs.
Sounds good.
It really is all about giving you more control
as an investor.
And that actually reminds me,
the source we were listening to,
they really emphasized how much variety there is
when it comes to ETFs.
Like you can invest in almost anything these days
through an ETFs.
Like you can invest in almost anything these days
through an ETF.
It's pretty mind blowing actually.
You know, it goes way beyond just stocks and bonds.
Oh yeah.
They were talking about ETFs that track commodities,
like gold and oil, real estate.
Even specific industries like clean energy or AI.
It's incredible.
You can basically invest in any sector or trend
that you're interested in.
So instead of trying to pick individual stocks,
you could invest in a whole sector
that you think is gonna do well.
Exactly.
Like imagine investing in an ETF
that focuses on companies developing sustainable solutions.
Oh, that's a good one.
Right.
I like that.
So you're not only growing your wealth,
but you're also supporting the future you wanna see.
Yeah, aligning your investments with your values.
Exactly.
Okay, so let's say I'm really interested
in the future of healthcare.
Okay.
Are there ETFs that focus on that?
Absolutely.
There are ETFs that track companies
at the forefront of medical innovation.
You know, things like gene editing, telemedicine,
all that cutting edge stuff.
So cool.
And what about like the electric vehicle market?
Everyone's talking about electric vehicles.
Of course.
There's probably like a dozen ETFs for that.
Really?
Yeah.
Wow.
It's a hot sector.
It really is.
ETFs have really changed the game, haven't they?
They have.
They've made investing accessible to everyone.
It's not just for, you know, Wall Street anymore.
Exactly.
You don't need a million dollars to get started.
Okay, so let's say I'm ready to start investing in ETFs.
Okay.
What are some things I should be thinking about?
Well, first things first.
You need to know what you're looking for.
Okay.
What are your goals?
Are you looking for long-term growth?
Are you looking for income or a little bit of both?
Makes sense.
And how much risk are you comfortable with?
Yeah, you don't want to, you know,
bite off more than you can chew.
Exactly.
It's like choosing the right hiking trail.
Ooh, I like that analogy.
Right.
You need to know your fitness level
and how challenging you want the hike to be.
Okay, so once I know my goals and my risk tolerance.
Then you need to do some research on the specific ETF
you're interested in.
Look at the underlying holdings.
What does that mean?
So basically what companies or assets make up that ETF?
Oh, okay.
Because the ETF strategy align with your own goals.
Got it.
It's like checking the ingredients list
before you buy food.
Yeah, you don't want any surprises?
Exactly.
And then of course you want to pay attention
to the expense ratio.
That's the fee, the fund manager charges, right?
Right.
And as we talked about earlier,
those fees can really add up over time.
Yeah, so lower is better.
Lower is better.
Okay.
And anything else I should be looking at?
Definitely look at the trading volume and liquidity.
What does that mean?
Basically you want to make sure
that there are enough people buying and selling the ETF.
Okay.
So that you can easily get in and out of your investment
when you need to.
So you're not stuck.
Exactly.
You don't want to be stuck with an ETF
that nobody wants to buy.
Like a steel piece of bread.
Exactly.
Okay, so to recap,
what are the key things to consider when choosing an ETF?
Your goals.
Okay.
The underlying holdings,
the expense ratio and the liquidity.
Got it.
That's a lot to keep in mind.
It is, but don't worry.
There are lots of resources out there
that can help you.
Oh, good.
Websites, financial advisors.
So you don't have to go it alone?
You don't have to.
Great.
So I'm feeling a little more confident about ETFs now.
Good, I'm glad to hear that.
But I have to admit,
it's still a little bit overwhelming.
I understand.
It's a big world out there.
It is.
So where do I even start?
Well, my advice would be to just start exploring.
Exploring.
Yeah.
There are websites where you can filter ETFs
based on your interests, your risk tolerance, all of that.
Okay.
Think about the sectors or trends
that you're excited about.
Right.
And see if there's an ETF that aligns with your vision.
So it's about finding investments
that you're passionate about.
Exactly.
It should be fun.
Fun.
Yeah, investing shouldn't feel like a chore.
I agree with that.
I mean, it's really amazing how approachable ETFs
have made investing, wouldn't you say?
Oh, absolutely.
They've really, I think, taken what could be
a kind of complicated and intimidating world
and made it so much more accessible for everybody.
Yeah.
And thinking back to the podcast
that we've been talking about today,
it seems like ETFs really offer a really great combo
of benefits for in-vehicleers of all different levels.
Definitely.
Diversification, low fees, flexibility,
the tax advantages, liquidity.
It's like they took all the best parts of investing
and put it all in one package.
Yeah, with so many different ETFs to choose from,
you can really tailor those investments
to your specific interests and goals.
Exactly.
Whatever you're passionate about,
whether it's renewable energy or AI
or the future of healthcare,
there's probably an ETF out there that's perfect for you.
And it's empowering too, right?
To think that you can not only grow your wealth,
but also support those causes and innovations
that you believe in.
Yeah, it really is.
It's a win-win.
So I have a question for you and for our listeners.
Okay, I'm ready.
If you could invest in any sector or trend using an ETF,
what would it be and why?
That's a good question.
I think for me, it would have to be an ETF
that focuses on sustainable food solutions.
Oh, interesting.
Tell me more.
Well, you know, I'm really interested in companies
that are doing innovative things in like vertical farming
or alternative proteins, regenerative agriculture,
all that kind of stuff.
It's a sector that's not only addressing
like really critical global challenges,
but also it's poised for like huge growth
in the coming years.
I love that.
That's a fantastic choice.
What about you?
Where would your investment journey take you
if you could pick any ETF?
Ooh, that's tough.
There are so many exciting possibilities,
but if I had to pick just one,
I think I'd go with an ETF
that's all about space exploration.
Ooh, space exploration.
Yeah, you know, investing in companies
that are pushing the boundaries of human knowledge,
venturing into the unknown,
that just really captures my imagination.
That's such a great choice.
And it's a sector that has so much potential,
you know, in the years to come.
For sure.
Well, I think it's time to wrap up our deep dive
into the world of ETFs today.
Yes.
We hope this episode has given you a clear understanding
of what ETFs are, how they work,
and why they might be a good addition
to your investment portfolio.
Absolutely.
And remember, knowledge is power.
So the more you learn about ETFs,
the better prepared you'll be
to make those informed decisions
and create a portfolio
that really reflects your own goals and aspirations.
Thanks for joining us on this journey of discovery.
Yes, thank you.
We encourage you to continue exploring
the world of ETFs
and discover all the amazing possibilities
that they offer.
Until next time, happy investing.
Happy investing.