1 00:00:00,000 --> 00:00:02,600 Hey everyone and welcome to another deep dive. 2 00:00:02,600 --> 00:00:06,440 You know, today we are going to be taking a look at ETFs. 3 00:00:06,440 --> 00:00:07,280 Okay. 4 00:00:07,280 --> 00:00:09,800 But not just ETFs in general, 5 00:00:09,800 --> 00:00:11,400 the listeners send in a bunch of stuff 6 00:00:11,400 --> 00:00:16,400 and they seem really interested in how ETFs are well, 7 00:00:16,920 --> 00:00:20,560 kind of affected by like the big picture economy. 8 00:00:20,560 --> 00:00:21,400 You know what I mean? 9 00:00:21,400 --> 00:00:23,880 Like all those things that are affecting the markets 10 00:00:23,880 --> 00:00:25,240 like as a whole. 11 00:00:25,240 --> 00:00:26,920 So that's what we're gonna be looking at today. 12 00:00:26,920 --> 00:00:30,760 Yeah, it's like if you're sailing a ship, 13 00:00:30,760 --> 00:00:33,760 okay, you need to understand the winds and the tides, 14 00:00:33,760 --> 00:00:36,040 not just how to like work the boat, you know. 15 00:00:36,040 --> 00:00:37,320 Yeah, perfect analogy. 16 00:00:37,320 --> 00:00:39,040 Okay, so I guess what we're really talking about here 17 00:00:39,040 --> 00:00:40,920 is macro economics, right? 18 00:00:40,920 --> 00:00:43,920 So like inflation and interest rates and all those things. 19 00:00:43,920 --> 00:00:45,200 Yeah, all the stuff that makes headlines. 20 00:00:45,200 --> 00:00:46,040 Yeah, exact. 21 00:00:46,040 --> 00:00:46,880 It affects our wallets. 22 00:00:46,880 --> 00:00:47,720 Right, exactly. 23 00:00:47,720 --> 00:00:48,880 I like to think of it as like, 24 00:00:48,880 --> 00:00:52,240 instead of just worrying about like your grocery bill, 25 00:00:52,240 --> 00:00:54,920 we're thinking about like the entire supermarket, 26 00:00:54,920 --> 00:00:57,680 you know, like the prices in the entire supermarket 27 00:00:57,680 --> 00:00:59,240 and then like even bigger than that. 28 00:00:59,240 --> 00:01:00,440 You know, all the supermarkets. 29 00:01:00,440 --> 00:01:02,440 Yeah, and like where the food's coming from 30 00:01:02,440 --> 00:01:03,280 and all of that. 31 00:01:03,280 --> 00:01:04,360 Yeah, the whole system. 32 00:01:04,360 --> 00:01:07,680 Okay, so how does all of this supermarket stuff 33 00:01:07,680 --> 00:01:09,040 affect ETFs? 34 00:01:10,120 --> 00:01:15,120 Well, you can think of ETFs like baskets of assets 35 00:01:15,480 --> 00:01:18,800 that are put together to like reflect a certain sector 36 00:01:18,800 --> 00:01:21,040 or index or investment strategy. 37 00:01:21,040 --> 00:01:21,880 Okay. 38 00:01:21,880 --> 00:01:25,920 And so when the macro economic wins shift, 39 00:01:25,920 --> 00:01:29,440 some of those baskets like become more attractive than others. 40 00:01:29,440 --> 00:01:30,680 Okay, that makes sense. 41 00:01:30,680 --> 00:01:32,280 So let's take inflation for example, 42 00:01:32,280 --> 00:01:34,800 because that's been a big topic lately. 43 00:01:34,800 --> 00:01:36,400 And one of the articles you sent in 44 00:01:36,400 --> 00:01:39,840 talked about commodity ETFs, so things like gold. 45 00:01:39,840 --> 00:01:41,080 Yeah, gold oil. 46 00:01:41,080 --> 00:01:42,680 Yeah, oil exactly. 47 00:01:42,680 --> 00:01:45,880 And how those often do well when inflation is high. 48 00:01:45,880 --> 00:01:47,880 Right, it all comes down to hedging. 49 00:01:47,880 --> 00:01:48,720 Okay. 50 00:01:48,720 --> 00:01:51,920 And that is when your currency is losing value 51 00:01:51,920 --> 00:01:53,600 because of inflation, 52 00:01:53,600 --> 00:01:56,560 people look for assets that will hold their value. 53 00:01:56,560 --> 00:01:57,400 Okay. 54 00:01:57,400 --> 00:01:58,240 Like commodities. 55 00:01:58,240 --> 00:01:59,480 Okay, so it's not just about the commodity itself, 56 00:01:59,480 --> 00:02:02,360 it's also about how easy it is to get in and out 57 00:02:02,360 --> 00:02:03,440 of those investments. 58 00:02:03,440 --> 00:02:06,520 Exactly, and that's a key advantage of ETFs. 59 00:02:06,520 --> 00:02:08,960 Especially compared to like traditional mutual funds. 60 00:02:08,960 --> 00:02:11,560 Because ETFs trade all day long. 61 00:02:11,560 --> 00:02:12,960 Oh, right, like stocks. 62 00:02:12,960 --> 00:02:13,800 Yeah, like stock. 63 00:02:13,800 --> 00:02:14,640 Okay. 64 00:02:14,640 --> 00:02:17,440 So you can react quickly to like market shifts or news 65 00:02:17,440 --> 00:02:20,000 or even macroeconomic announcements and stuff. 66 00:02:20,000 --> 00:02:21,480 So it's all happening in real time. 67 00:02:21,480 --> 00:02:22,320 Yeah. 68 00:02:22,320 --> 00:02:23,160 That's really interesting. 69 00:02:23,160 --> 00:02:25,320 One of the reports that you sent in talked about 70 00:02:25,320 --> 00:02:27,960 the recovery after the pandemic 71 00:02:27,960 --> 00:02:31,600 and how both growth focused ETFs, 72 00:02:31,600 --> 00:02:34,960 you know the ones that are like in tech and healthcare 73 00:02:34,960 --> 00:02:39,040 and cyclical ETFs, like travel and manufacturing. 74 00:02:39,040 --> 00:02:40,480 Yeah, all those benefited. 75 00:02:40,480 --> 00:02:42,520 Yeah, they all had this big surge. 76 00:02:42,520 --> 00:02:46,800 Yeah, it's a great example of how ETFs can reflect 77 00:02:46,800 --> 00:02:50,160 but also anticipate like the market sentiment. 78 00:02:50,160 --> 00:02:53,360 So as the economy began to recover, 79 00:02:53,360 --> 00:02:55,800 investors sort of flocked to those ETFs 80 00:02:55,800 --> 00:02:58,880 because they were betting on those sectors to grow. 81 00:02:58,880 --> 00:03:01,240 Yeah, it's like they were designed for that moment. 82 00:03:01,240 --> 00:03:02,200 That's really interesting. 83 00:03:02,200 --> 00:03:05,000 And it's not just limited to domestic markets either, right? 84 00:03:05,000 --> 00:03:09,560 Because you sent some material about how ETFs can make it 85 00:03:09,560 --> 00:03:12,440 easier to invest internationally, 86 00:03:12,440 --> 00:03:15,200 which used to be kind of hard for like the average person. 87 00:03:15,200 --> 00:03:16,320 Right, exactly. 88 00:03:16,320 --> 00:03:19,720 Yeah, you can invest in Asian growth markets 89 00:03:19,720 --> 00:03:23,440 or Europe's green energy transition, 90 00:03:23,440 --> 00:03:25,880 all without needing to be an expert 91 00:03:25,880 --> 00:03:27,160 in those specific regions. 92 00:03:27,160 --> 00:03:30,040 So it's like having a passport for investments 93 00:03:30,040 --> 00:03:31,040 all over the world, 94 00:03:31,040 --> 00:03:32,960 just right there in your brokerage account. 95 00:03:32,960 --> 00:03:33,880 That's so cool. 96 00:03:33,880 --> 00:03:37,280 And that ease of access combined with like 97 00:03:37,280 --> 00:03:40,360 the diversification that a lot of ETFs provide, 98 00:03:40,360 --> 00:03:42,360 it's really like opened up investing. 99 00:03:42,360 --> 00:03:43,600 It's democratized it. 100 00:03:43,600 --> 00:03:44,760 Yeah, exactly. 101 00:03:44,760 --> 00:03:46,720 It's not just for super rich people anymore. 102 00:03:46,720 --> 00:03:47,520 Exactly. 103 00:03:47,520 --> 00:03:50,760 Okay, so we've talked about how ETFs are affected 104 00:03:50,760 --> 00:03:52,680 by things like inflation 105 00:03:52,680 --> 00:03:56,160 and how they react to like sudden changes in the market. 106 00:03:56,160 --> 00:03:58,480 But a lot of the research that you sent in 107 00:03:58,480 --> 00:04:03,080 also highlighted how ETFs can actually do really well 108 00:04:03,080 --> 00:04:04,840 during tough times. 109 00:04:04,840 --> 00:04:07,920 Like they don't just survive, they thrive. 110 00:04:07,920 --> 00:04:12,360 And you had some good stuff about the COVID crash in 2020. 111 00:04:12,360 --> 00:04:14,840 And the role that bond ETFs played. 112 00:04:14,840 --> 00:04:18,440 Exactly, like when everything was super uncertain 113 00:04:18,440 --> 00:04:20,920 and people were freaking out about bonds, 114 00:04:20,920 --> 00:04:24,320 bond ETFs were like providing liquidity 115 00:04:24,320 --> 00:04:25,520 and price transparency. 116 00:04:25,520 --> 00:04:27,200 So they kept things moving 117 00:04:27,200 --> 00:04:29,040 when the bond market was basically frozen. 118 00:04:29,040 --> 00:04:30,280 Yeah, exactly. 119 00:04:30,280 --> 00:04:31,360 That's amazing. 120 00:04:31,360 --> 00:04:33,680 And a lot of experts say that this ability 121 00:04:33,680 --> 00:04:36,240 to handle like the ups and downs 122 00:04:36,240 --> 00:04:38,560 has to do with some key economic principles. 123 00:04:38,560 --> 00:04:41,440 Yeah, you mentioned something called the efficient market 124 00:04:41,440 --> 00:04:42,960 hypothesis. 125 00:04:42,960 --> 00:04:44,320 What is that again? 126 00:04:44,320 --> 00:04:46,280 So that hypothesis basically says 127 00:04:46,280 --> 00:04:49,320 that all the available information, 128 00:04:49,320 --> 00:04:52,320 like good news, bad news, 129 00:04:52,320 --> 00:04:54,720 warnings about a recession, whatever, 130 00:04:54,720 --> 00:04:57,440 it's already baked into the price of the asset. 131 00:04:57,440 --> 00:05:00,320 So trying to outsmart the market is really hard. 132 00:05:00,320 --> 00:05:02,240 So that's where ETFs come in. 133 00:05:02,240 --> 00:05:05,960 Because instead of trying to pick individual stocks 134 00:05:05,960 --> 00:05:08,720 and potentially like missing something important 135 00:05:08,720 --> 00:05:12,480 with an ETF, you're kind of capturing the whole market 136 00:05:12,480 --> 00:05:15,080 by tracking like a broad index. 137 00:05:15,080 --> 00:05:16,480 Yeah, or a specific sector. 138 00:05:16,480 --> 00:05:19,760 Okay, so it's more about going with the flow of the market 139 00:05:19,760 --> 00:05:20,800 than trying to beat it. 140 00:05:20,800 --> 00:05:22,960 Yeah, you're embracing the wisdom of the market. 141 00:05:22,960 --> 00:05:24,000 Yeah, yeah, exactly. 142 00:05:24,000 --> 00:05:26,480 Instead of trying to be like a stock picking genius 143 00:05:26,480 --> 00:05:27,320 or whatever. 144 00:05:27,320 --> 00:05:28,480 Okay, that makes sense. 145 00:05:28,480 --> 00:05:31,680 So we've talked about how these ETF baskets 146 00:05:31,680 --> 00:05:34,080 are affected by things like inflation 147 00:05:34,080 --> 00:05:37,320 and how they react to like those sudden market changes. 148 00:05:37,320 --> 00:05:39,440 But we've also seen that their structure 149 00:05:39,440 --> 00:05:42,600 is kind of designed to weather those economic storms. 150 00:05:42,600 --> 00:05:43,440 Exactly. 151 00:05:43,440 --> 00:05:44,560 But you were saying earlier 152 00:05:44,560 --> 00:05:46,680 that there's even more to the story. 153 00:05:46,680 --> 00:05:48,040 Oh yeah, there's a lot more. 154 00:05:48,040 --> 00:05:50,880 We've been talking about ETFs kind of generally, 155 00:05:50,880 --> 00:05:53,440 but there's a whole world of nuance 156 00:05:53,440 --> 00:05:56,360 within this universe of ETFs. 157 00:05:56,360 --> 00:05:58,320 There are different types 158 00:05:58,320 --> 00:06:00,920 that cater to different needs and strategies. 159 00:06:00,920 --> 00:06:02,920 This is where it gets really interesting. 160 00:06:02,920 --> 00:06:04,280 Okay, so in your notes, 161 00:06:04,280 --> 00:06:07,280 you mentioned something called factor-based ETFs. 162 00:06:07,280 --> 00:06:08,360 Uh-huh. 163 00:06:08,360 --> 00:06:09,920 And also smart beta. 164 00:06:09,920 --> 00:06:10,760 Yes. 165 00:06:10,760 --> 00:06:11,840 Those sound kind of cool. 166 00:06:11,840 --> 00:06:12,840 They are really cool. 167 00:06:12,840 --> 00:06:13,660 Okay. 168 00:06:13,660 --> 00:06:17,640 And they really show how ETFs have evolved beyond 169 00:06:17,640 --> 00:06:20,240 just tracking basic market indices. 170 00:06:20,240 --> 00:06:21,120 So what are they? 171 00:06:21,120 --> 00:06:23,040 So factor-based ETFs, for example. 172 00:06:23,040 --> 00:06:23,880 Okay. 173 00:06:23,880 --> 00:06:26,480 They let you target specific investment factors. 174 00:06:26,480 --> 00:06:27,320 Okay. 175 00:06:27,320 --> 00:06:29,560 That have historically driven returns. 176 00:06:29,560 --> 00:06:30,840 Okay, so what kind of factors? 177 00:06:30,840 --> 00:06:34,800 Things like value, growth, momentum, 178 00:06:34,800 --> 00:06:38,560 quality, even low volatility. 179 00:06:38,560 --> 00:06:42,760 So if I believe that companies with strong momentum, 180 00:06:42,760 --> 00:06:44,440 like their stock prices are going up, 181 00:06:44,440 --> 00:06:45,760 they're gonna do better, 182 00:06:45,760 --> 00:06:49,040 I could find an ETF that's focused on that. 183 00:06:49,040 --> 00:06:49,880 Exactly. 184 00:06:49,880 --> 00:06:50,720 Okay. 185 00:06:50,720 --> 00:06:51,560 So it's a more targeted approach. 186 00:06:51,560 --> 00:06:52,400 Okay. 187 00:06:52,400 --> 00:06:53,840 You know, aligning your investments 188 00:06:53,840 --> 00:06:56,800 with specific beliefs about what drives markets. 189 00:06:56,800 --> 00:06:58,360 Okay, and what about smart beta? 190 00:06:58,360 --> 00:06:59,800 So smart beta. 191 00:06:59,800 --> 00:07:00,640 Is that similar? 192 00:07:00,640 --> 00:07:01,720 Yeah, it's related. 193 00:07:01,720 --> 00:07:02,560 Okay. 194 00:07:02,560 --> 00:07:04,400 It aims to outperform traditional 195 00:07:04,400 --> 00:07:06,800 market cap weighted indices. 196 00:07:06,800 --> 00:07:09,080 Okay, wait, remind me what's market cap weighted again? 197 00:07:09,080 --> 00:07:12,440 So market cap weighted just means that the weighting 198 00:07:12,440 --> 00:07:15,800 of a company in the index is determined 199 00:07:15,800 --> 00:07:17,360 by its market capitalization. 200 00:07:17,360 --> 00:07:18,200 Okay. 201 00:07:18,200 --> 00:07:21,400 So bigger companies have a bigger impact 202 00:07:21,400 --> 00:07:23,120 on how that index performs. 203 00:07:23,120 --> 00:07:23,960 Okay. 204 00:07:23,960 --> 00:07:26,400 And smart beta tries to do things a little differently. 205 00:07:26,400 --> 00:07:29,400 Right, instead of just following market cap blindly, 206 00:07:29,400 --> 00:07:32,920 smart beta ETFs might use different weighting, 207 00:07:32,920 --> 00:07:35,920 maybe focusing on things like value or dividends. 208 00:07:35,920 --> 00:07:36,760 Okay. 209 00:07:36,760 --> 00:07:38,200 To potentially improve returns. 210 00:07:38,200 --> 00:07:39,040 Okay. 211 00:07:39,040 --> 00:07:39,960 Or lower risk. 212 00:07:39,960 --> 00:07:43,160 So it's like adding an extra layer of like smarts 213 00:07:43,160 --> 00:07:44,800 to the way the index tracks things. 214 00:07:44,800 --> 00:07:47,320 Exactly, tilting the scales 215 00:07:47,320 --> 00:07:49,280 in favor of certain characteristics. 216 00:07:49,280 --> 00:07:50,120 Okay. 217 00:07:50,120 --> 00:07:52,160 And that's where the line between like passive 218 00:07:52,160 --> 00:07:54,400 and active investing gets a little blurry. 219 00:07:54,400 --> 00:07:55,240 Okay. 220 00:07:55,240 --> 00:07:56,840 Because ETFs are usually considered passive. 221 00:07:56,840 --> 00:07:57,680 Right. 222 00:07:57,680 --> 00:07:59,600 And so like smart beta strategies 223 00:07:59,600 --> 00:08:02,480 are bringing in a little bit of active decision making. 224 00:08:02,480 --> 00:08:04,480 It's really interesting how ETFs are becoming 225 00:08:04,480 --> 00:08:07,000 more and more customizable. 226 00:08:07,000 --> 00:08:08,000 You know? 227 00:08:08,000 --> 00:08:10,880 It's not just about buying the whole market anymore. 228 00:08:10,880 --> 00:08:14,120 It's about like picking and choosing exactly what you want. 229 00:08:14,120 --> 00:08:14,960 Exactly. 230 00:08:14,960 --> 00:08:18,960 And this is happening because of like new financial technology 231 00:08:18,960 --> 00:08:21,800 and also because we're understanding markets better. 232 00:08:21,800 --> 00:08:22,640 Right. 233 00:08:22,640 --> 00:08:25,200 Which brings us back to macroeconomics 234 00:08:25,200 --> 00:08:27,200 and how it affects ETFs. 235 00:08:27,200 --> 00:08:29,680 Because even with these fancy ETFs, 236 00:08:29,680 --> 00:08:32,600 those big macroeconomic forces are still in play. 237 00:08:32,600 --> 00:08:34,400 So we always have to keep those in mind. 238 00:08:34,400 --> 00:08:35,240 Exactly. 239 00:08:35,240 --> 00:08:36,880 Those wins and tides we talked about. 240 00:08:36,880 --> 00:08:38,160 They're always there. 241 00:08:38,160 --> 00:08:40,680 This is way more complicated than I thought it was gonna be. 242 00:08:40,680 --> 00:08:44,520 We've gone from like basic definitions of ETFs 243 00:08:44,520 --> 00:08:48,840 to the mechanics of how they trade their global reach. 244 00:08:48,840 --> 00:08:50,880 And now we're talking about smart beta. 245 00:08:50,880 --> 00:08:51,800 It's a whole world. 246 00:08:51,800 --> 00:08:53,120 Yeah, it is. 247 00:08:53,120 --> 00:08:55,320 But I have a feeling there's even more. 248 00:08:55,320 --> 00:08:56,160 Oh yeah. 249 00:08:56,160 --> 00:08:58,520 We've only just begun to peel back the layers of the onion. 250 00:08:58,520 --> 00:08:59,360 Okay. 251 00:08:59,360 --> 00:09:01,120 We talked about how ETFs are resilient. 252 00:09:01,120 --> 00:09:01,960 Yeah. 253 00:09:01,960 --> 00:09:03,000 During past crises. 254 00:09:03,000 --> 00:09:04,040 Mm-hmm. 255 00:09:04,040 --> 00:09:07,920 But the future is full of new challenges and opportunities. 256 00:09:09,040 --> 00:09:10,880 Okay, I'm ready for the next layer. 257 00:09:10,880 --> 00:09:11,720 Right. 258 00:09:11,720 --> 00:09:14,880 What's coming up for ETFs in this crazy world? 259 00:09:14,880 --> 00:09:15,720 Well, 260 00:09:17,360 --> 00:09:20,960 so we've talked about how ETFs can be like 261 00:09:20,960 --> 00:09:23,960 really powerful tools for navigating the market. 262 00:09:23,960 --> 00:09:24,800 Right. 263 00:09:24,800 --> 00:09:27,880 But it's important to remember. 264 00:09:27,880 --> 00:09:28,720 Okay. 265 00:09:28,720 --> 00:09:31,480 They're not like a one size fits all solution. 266 00:09:31,480 --> 00:09:34,040 Right, not every strategy works for every person. 267 00:09:34,040 --> 00:09:34,880 Exactly. 268 00:09:34,880 --> 00:09:35,720 Or every time. 269 00:09:35,720 --> 00:09:39,240 So like when might ETFs not be the best choice? 270 00:09:39,240 --> 00:09:42,720 Well, one scenario is if you're looking for something 271 00:09:42,720 --> 00:09:44,360 very specific. 272 00:09:44,360 --> 00:09:46,400 Let's say you're like really interested 273 00:09:46,400 --> 00:09:48,160 in a super niche company. 274 00:09:48,160 --> 00:09:49,000 Right. 275 00:09:49,000 --> 00:09:49,840 Or a tiny sector. 276 00:09:49,840 --> 00:09:50,660 Yeah. 277 00:09:50,660 --> 00:09:53,320 You might not find an ETF that has that laser focus. 278 00:09:53,320 --> 00:09:55,640 So it's like if you're looking for a rare gem. 279 00:09:55,640 --> 00:09:56,480 Yeah. 280 00:09:56,480 --> 00:09:57,720 You kind of have to go digging yourself. 281 00:09:57,720 --> 00:09:58,560 Exactly. 282 00:09:58,560 --> 00:10:00,800 Instead of relying on a preassembled collection. 283 00:10:00,800 --> 00:10:01,640 Right. 284 00:10:01,640 --> 00:10:02,480 Okay, that makes sense. 285 00:10:02,480 --> 00:10:04,560 Another thing to consider is risk tolerance. 286 00:10:04,560 --> 00:10:05,400 Okay. 287 00:10:05,400 --> 00:10:09,800 So while ETFs do offer diversification, 288 00:10:09,800 --> 00:10:12,480 which can help like smooth out the bars in the market. 289 00:10:12,480 --> 00:10:13,320 Right. 290 00:10:13,320 --> 00:10:16,520 They still move with the assets they track. 291 00:10:16,520 --> 00:10:18,320 So if the whole stock market tanks. 292 00:10:18,320 --> 00:10:19,160 Yes. 293 00:10:19,160 --> 00:10:20,960 By diversified ETF is probably gonna go down too. 294 00:10:20,960 --> 00:10:21,920 Right. 295 00:10:21,920 --> 00:10:23,280 But just maybe not as much. 296 00:10:23,280 --> 00:10:24,120 All right. 297 00:10:24,120 --> 00:10:27,840 So diversification within an ETF doesn't mean it's immune 298 00:10:27,840 --> 00:10:29,640 to what's happening in the market overall. 299 00:10:29,640 --> 00:10:30,480 Right. 300 00:10:30,480 --> 00:10:32,480 Okay, so if I'm like super risk averse, 301 00:10:32,480 --> 00:10:34,440 like I really wanna protect my money. 302 00:10:34,440 --> 00:10:35,360 Yeah. 303 00:10:35,360 --> 00:10:37,400 There might be other options that are better. 304 00:10:37,400 --> 00:10:38,240 Right, exactly. 305 00:10:38,240 --> 00:10:40,360 And then this all kind of ties back to what we were talking 306 00:10:40,360 --> 00:10:42,320 about earlier about macroeconomics. 307 00:10:42,320 --> 00:10:45,560 Knowing how something like rising interest rates 308 00:10:45,560 --> 00:10:47,520 could affect certain sectors. 309 00:10:47,520 --> 00:10:48,360 Right. 310 00:10:48,360 --> 00:10:49,920 Could help me pick the right ETF. 311 00:10:49,920 --> 00:10:50,760 Absolutely. 312 00:10:50,760 --> 00:10:52,840 Like for example, if I think interest rates 313 00:10:52,840 --> 00:10:55,840 are gonna go up, I might wanna look at ETFs 314 00:10:55,840 --> 00:10:58,200 that focus on financial companies. 315 00:10:58,200 --> 00:11:01,040 Right, because they tend to do well in that environment. 316 00:11:01,040 --> 00:11:05,840 Okay, so it's all about like matching my ETF choices 317 00:11:05,840 --> 00:11:07,720 with what I think is gonna happen 318 00:11:07,720 --> 00:11:08,720 in the economy. 319 00:11:08,720 --> 00:11:10,400 It's like having a compass to guide you. 320 00:11:10,400 --> 00:11:12,160 Even when things get rough. 321 00:11:12,160 --> 00:11:13,000 Exactly. 322 00:11:13,000 --> 00:11:15,720 And this is why that efficient market hypothesis 323 00:11:15,720 --> 00:11:17,360 is so important. 324 00:11:17,360 --> 00:11:21,800 Because if all the information's already out there, 325 00:11:21,800 --> 00:11:24,800 and it's reflected in the prices, 326 00:11:24,800 --> 00:11:27,680 trying to be smarter than everyone else 327 00:11:27,680 --> 00:11:30,440 and pick individual stocks is really hard. 328 00:11:30,440 --> 00:11:31,680 It's almost impossible. 329 00:11:31,680 --> 00:11:32,520 Right. 330 00:11:32,520 --> 00:11:36,040 So with ETFs, especially the ones that are tracking 331 00:11:36,040 --> 00:11:39,320 like broad indexes, you're not really trying 332 00:11:39,320 --> 00:11:41,560 to beat the market. 333 00:11:41,560 --> 00:11:43,960 You're trying to capture the whole market return. 334 00:11:43,960 --> 00:11:44,800 Exactly. 335 00:11:44,800 --> 00:11:46,880 Okay, so it's a different way of thinking. 336 00:11:46,880 --> 00:11:49,960 It's not about being a stock picking genius. 337 00:11:49,960 --> 00:11:51,760 It's about going along for the ride. 338 00:11:51,760 --> 00:11:53,640 Exactly, participating in the growth. 339 00:11:53,640 --> 00:11:57,160 Okay, and long term being like the key word there. 340 00:11:57,160 --> 00:11:58,360 Yeah, long term is key. 341 00:11:58,360 --> 00:12:01,480 Because markets go up, markets go down. 342 00:12:01,480 --> 00:12:03,200 So we gotta think long term. 343 00:12:03,200 --> 00:12:04,680 Yeah, you gotta ride those waves. 344 00:12:04,680 --> 00:12:05,520 Okay. 345 00:12:05,520 --> 00:12:07,080 And ETFs are designed for that. 346 00:12:07,080 --> 00:12:10,360 So we've talked about situations 347 00:12:10,360 --> 00:12:13,240 where ETFs might not be ideal. 348 00:12:13,240 --> 00:12:14,080 Right. 349 00:12:14,080 --> 00:12:17,280 And we've talked about some key economic principles 350 00:12:17,280 --> 00:12:18,880 that kind of make them successful. 351 00:12:18,880 --> 00:12:20,480 But you were saying earlier 352 00:12:20,480 --> 00:12:22,280 that there's more to this story. 353 00:12:22,280 --> 00:12:23,120 Oh yeah, there's more. 354 00:12:23,120 --> 00:12:23,960 Okay. 355 00:12:23,960 --> 00:12:25,600 So we've been talking about ETFs. 356 00:12:25,600 --> 00:12:26,440 Right. 357 00:12:26,440 --> 00:12:27,280 Kind of generally. 358 00:12:27,280 --> 00:12:28,240 Mm-hmm. 359 00:12:28,240 --> 00:12:31,000 But there's this whole world of nuance. 360 00:12:31,000 --> 00:12:31,840 No, okay. 361 00:12:31,840 --> 00:12:33,600 Within the ETF universe. 362 00:12:33,600 --> 00:12:34,440 Okay. 363 00:12:34,440 --> 00:12:36,000 There are different types. 364 00:12:36,000 --> 00:12:39,840 That are designed for different needs and strategies. 365 00:12:39,840 --> 00:12:41,320 This is where it gets really interesting. 366 00:12:41,320 --> 00:12:42,160 I know, right? 367 00:12:42,160 --> 00:12:43,000 Yeah. 368 00:12:43,000 --> 00:12:46,400 We touched on factor based ETFs and smart beta. 369 00:12:46,400 --> 00:12:47,240 Yeah. 370 00:12:47,240 --> 00:12:48,840 And those really demonstrate. 371 00:12:48,840 --> 00:12:49,680 Okay. 372 00:12:49,680 --> 00:12:50,880 That the ETFs have evolved. 373 00:12:50,880 --> 00:12:51,720 Okay. 374 00:12:51,720 --> 00:12:53,840 Beyond just tracking basic indexes. 375 00:12:53,840 --> 00:12:55,600 So factor based ETFs, 376 00:12:55,600 --> 00:12:58,040 they let you target certain factors 377 00:12:58,040 --> 00:13:00,480 that have historically driven returns. 378 00:13:00,480 --> 00:13:05,480 Things like value, growth, momentum, quality, 379 00:13:06,160 --> 00:13:07,720 even low volatility. 380 00:13:07,720 --> 00:13:12,720 So if I believe that companies that have strong momentum, 381 00:13:13,160 --> 00:13:16,120 like their stock prices are going up consistently, 382 00:13:16,120 --> 00:13:18,400 they're gonna outperform the market, 383 00:13:18,400 --> 00:13:21,800 I could find an ETF that focuses on that. 384 00:13:21,800 --> 00:13:22,640 Exactly. 385 00:13:22,640 --> 00:13:25,480 It allows for a much more targeted approach. 386 00:13:25,480 --> 00:13:26,320 Okay. 387 00:13:26,320 --> 00:13:27,680 You can align your investments 388 00:13:27,680 --> 00:13:29,040 with your specific beliefs. 389 00:13:29,040 --> 00:13:29,880 Okay. 390 00:13:29,880 --> 00:13:30,720 And what about smart beta? 391 00:13:30,720 --> 00:13:32,960 So smart beta strategies, 392 00:13:32,960 --> 00:13:35,200 they try to do better than traditional 393 00:13:35,200 --> 00:13:36,640 market cap weighted indexes. 394 00:13:36,640 --> 00:13:37,480 Okay, wait. 395 00:13:37,480 --> 00:13:39,800 Remind me, what's market cap weighted again? 396 00:13:39,800 --> 00:13:43,640 Oh, so it just means that the weighting of a company 397 00:13:43,640 --> 00:13:47,400 within an index is determined by its 398 00:13:47,400 --> 00:13:48,840 market capitalization. 399 00:13:48,840 --> 00:13:50,680 So like the total value of all its shares. 400 00:13:50,680 --> 00:13:51,520 Gotcha. 401 00:13:51,520 --> 00:13:53,720 So bigger companies have a bigger impact 402 00:13:53,720 --> 00:13:54,800 on the performance of the index. 403 00:13:54,800 --> 00:13:56,680 And smart beta does things differently. 404 00:13:56,680 --> 00:13:57,520 Right. 405 00:13:57,520 --> 00:14:00,520 So instead of just blindly following market cap, 406 00:14:00,520 --> 00:14:05,520 smart beta ETFs might use different weighting method. 407 00:14:05,940 --> 00:14:08,760 Maybe focusing on value or dividends, 408 00:14:08,760 --> 00:14:11,680 party enhanced returns or reduce risk. 409 00:14:11,680 --> 00:14:14,920 So it's like adding like a layer of smarts 410 00:14:14,920 --> 00:14:17,880 to the index tracking, tilting the scales. 411 00:14:17,880 --> 00:14:18,720 Yeah. 412 00:14:18,720 --> 00:14:19,540 Okay. 413 00:14:19,540 --> 00:14:21,440 And this is where that line between passive 414 00:14:21,440 --> 00:14:23,600 and active investing gets blurry. 415 00:14:23,600 --> 00:14:24,440 Yeah. 416 00:14:24,440 --> 00:14:26,200 Because ETFs are generally considered passive. 417 00:14:26,200 --> 00:14:27,520 Yeah. 418 00:14:27,520 --> 00:14:31,680 But smart beta strategies introduce an element 419 00:14:31,680 --> 00:14:33,000 of active decision making. 420 00:14:33,000 --> 00:14:36,000 It's really interesting how ETFs are offering this level 421 00:14:36,000 --> 00:14:38,820 of like customization and strategy. 422 00:14:38,820 --> 00:14:40,960 It's not just about buying the whole market anymore. 423 00:14:40,960 --> 00:14:43,160 It's about targeting very specific parts. 424 00:14:43,160 --> 00:14:44,000 Exactly. 425 00:14:44,000 --> 00:14:48,400 And this evolution is driven by new financial technology 426 00:14:48,400 --> 00:14:50,440 and a better understanding of how markets work. 427 00:14:50,440 --> 00:14:52,000 Which brings us back to that connection 428 00:14:52,000 --> 00:14:55,960 between macroeconomic and ETF performance. 429 00:14:55,960 --> 00:14:57,120 It always comes back to that. 430 00:14:57,120 --> 00:15:00,880 Because even with these more sophisticated ETFs, 431 00:15:00,880 --> 00:15:03,640 we're still subject to those big economic forces. 432 00:15:03,640 --> 00:15:04,480 Exactly. 433 00:15:04,480 --> 00:15:06,040 Those wins and tides we talked about, 434 00:15:06,040 --> 00:15:07,600 they're always shaping the landscape. 435 00:15:07,600 --> 00:15:08,440 Okay. 436 00:15:08,440 --> 00:15:10,400 This is way more intricate than I realized. 437 00:15:10,400 --> 00:15:13,440 We've gone from like basic definitions 438 00:15:13,440 --> 00:15:17,240 to like the mechanics of trading, global reach. 439 00:15:17,240 --> 00:15:19,720 And now we're talking about smart beta. 440 00:15:19,720 --> 00:15:20,620 That's amazing. 441 00:15:21,520 --> 00:15:22,560 It is. 442 00:15:22,560 --> 00:15:23,960 But I have a feeling there's more. 443 00:15:23,960 --> 00:15:27,720 There is, we haven't even gotten to the good stuff yet. 444 00:15:27,720 --> 00:15:32,320 We've talked about the resilience of ETFs in past crises. 445 00:15:32,320 --> 00:15:35,440 But the future has its own set of challenges 446 00:15:35,440 --> 00:15:36,280 and opportunities. 447 00:15:36,280 --> 00:15:37,120 Okay. 448 00:15:37,120 --> 00:15:38,080 I'm ready for the next level. 449 00:15:38,080 --> 00:15:41,000 What lies ahead for ETFs in this crazy world? 450 00:15:41,000 --> 00:15:46,000 Well, it feels like we've gone on this whirlwind tour 451 00:15:47,280 --> 00:15:49,880 of the whole ETF universe. 452 00:15:49,880 --> 00:15:51,160 I know, it's crazy. 453 00:15:51,160 --> 00:15:54,720 From basic definitions to smart beta strategies. 454 00:15:54,720 --> 00:15:57,120 It's clear there's a lot more to ETFs 455 00:15:57,120 --> 00:15:58,640 than you might think at first. 456 00:15:58,640 --> 00:15:59,600 Yeah, for sure. 457 00:16:00,480 --> 00:16:02,240 You mentioned that the future holds 458 00:16:02,240 --> 00:16:05,680 both challenges and opportunities for ETFs. 459 00:16:05,680 --> 00:16:09,600 So what are some of the big trends on the horizon? 460 00:16:09,600 --> 00:16:12,480 What one major trend is sustainability. 461 00:16:12,480 --> 00:16:13,320 Okay. 462 00:16:13,320 --> 00:16:18,320 So ESG investing, which considers environmental, 463 00:16:19,400 --> 00:16:21,840 social and governance factors, 464 00:16:21,840 --> 00:16:23,280 it's gaining a lot of momentum. 465 00:16:23,280 --> 00:16:26,480 Yeah, I've definitely seen more ETFs focused 466 00:16:26,480 --> 00:16:30,520 on things like clean energy and social responsibility 467 00:16:30,520 --> 00:16:32,560 and ethical corporate governance. 468 00:16:32,560 --> 00:16:35,520 Yeah, and that trend is only gonna grow, 469 00:16:35,520 --> 00:16:37,520 especially as more investors, 470 00:16:37,520 --> 00:16:40,960 especially younger generations, demand more transparency. 471 00:16:40,960 --> 00:16:44,080 They want their investments to align with their values. 472 00:16:44,080 --> 00:16:45,680 So it's not just about making money. 473 00:16:45,680 --> 00:16:46,520 Right. 474 00:16:46,520 --> 00:16:47,360 It's about making a difference. 475 00:16:47,360 --> 00:16:49,160 Yeah, making a positive impact. 476 00:16:49,160 --> 00:16:51,520 And ETFs are making those kinds of investments 477 00:16:51,520 --> 00:16:52,960 available to more people. 478 00:16:52,960 --> 00:16:53,800 Exactly. 479 00:16:53,800 --> 00:16:54,640 That's great. 480 00:16:54,640 --> 00:16:57,200 Another trend is thematic ETFs. 481 00:16:57,200 --> 00:16:59,560 Thematic ETFs, what are those? 482 00:16:59,560 --> 00:17:02,480 So these ETFs let investors 483 00:17:02,480 --> 00:17:05,720 tap into specific mega trends. 484 00:17:05,720 --> 00:17:06,560 Mega trends. 485 00:17:06,560 --> 00:17:08,680 Yeah, those big long-term shifts 486 00:17:08,680 --> 00:17:10,400 that are shaping the global economy. 487 00:17:10,400 --> 00:17:11,720 Okay, give me some examples. 488 00:17:11,720 --> 00:17:14,920 Okay, so think about things like the rise of AI, 489 00:17:14,920 --> 00:17:19,160 the growth of e-commerce, the aging global population. 490 00:17:19,160 --> 00:17:23,600 There are ETFs designed to capture all of those themes. 491 00:17:23,600 --> 00:17:26,760 So instead of just investing in tech in general, 492 00:17:26,760 --> 00:17:31,200 I can pinpoint specific areas within tech 493 00:17:31,200 --> 00:17:32,800 that I think are gonna do really well. 494 00:17:32,800 --> 00:17:33,640 Exactly. 495 00:17:33,640 --> 00:17:38,480 Thematic ETFs let me be more focused. 496 00:17:38,480 --> 00:17:40,080 Yeah, they give you that laser focus. 497 00:17:40,080 --> 00:17:43,600 It was like I can invest in the stories 498 00:17:43,600 --> 00:17:45,400 that I think are gonna shape the future. 499 00:17:45,400 --> 00:17:46,640 I love that analogy. 500 00:17:46,640 --> 00:17:47,480 It's so cool. 501 00:17:47,480 --> 00:17:50,080 It really captures the essence of thematic investing. 502 00:17:50,080 --> 00:17:53,920 Okay, but with all these new options, strategies, 503 00:17:53,920 --> 00:17:55,520 how do I stay informed? 504 00:17:55,520 --> 00:17:56,560 That's a great question. 505 00:17:56,560 --> 00:18:00,400 Like how do I make good decisions? 506 00:18:00,400 --> 00:18:02,640 It really highlights the importance 507 00:18:02,640 --> 00:18:05,040 of continuous learning and due diligence. 508 00:18:05,040 --> 00:18:05,880 Okay. 509 00:18:05,880 --> 00:18:07,880 You know, there are tons of resources 510 00:18:07,880 --> 00:18:11,880 to help investors understand all the different types of ETFs. 511 00:18:11,880 --> 00:18:15,280 They're holding the potential risks and rewards. 512 00:18:15,280 --> 00:18:17,040 That's about doing my research. 513 00:18:17,040 --> 00:18:17,880 Exactly. 514 00:18:17,880 --> 00:18:21,080 Staying up to date on market trends 515 00:18:21,080 --> 00:18:23,880 and maybe even talking to a financial advisor. 516 00:18:23,880 --> 00:18:25,240 Right, if you need help. 517 00:18:25,240 --> 00:18:26,080 Okay, yeah. 518 00:18:26,080 --> 00:18:27,280 Knowledge is power. 519 00:18:27,280 --> 00:18:30,160 Absolutely, especially when it comes to investing. 520 00:18:30,160 --> 00:18:32,120 And it's not just about picking winners. 521 00:18:32,120 --> 00:18:35,200 It's about building a portfolio 522 00:18:35,200 --> 00:18:38,920 that matches my goals, my risk tolerance, 523 00:18:38,920 --> 00:18:40,560 my vision for the future. 524 00:18:40,560 --> 00:18:41,400 Exactly. 525 00:18:41,400 --> 00:18:42,760 That's powerful. 526 00:18:42,760 --> 00:18:43,600 It is. 527 00:18:43,600 --> 00:18:46,360 It's about investing with intention and purpose. 528 00:18:46,360 --> 00:18:47,200 Right. 529 00:18:47,200 --> 00:18:48,880 And ETFs can help me do that. 530 00:18:48,880 --> 00:18:49,720 They can. 531 00:18:49,720 --> 00:18:50,840 Because they're so flexible. 532 00:18:50,840 --> 00:18:51,880 Yeah, and diverse. 533 00:18:51,880 --> 00:18:54,240 This deep dive has been amazing. 534 00:18:54,240 --> 00:18:57,040 We've learned so much about ETFs, 535 00:18:57,040 --> 00:18:59,880 how they react to macroeconomics, 536 00:18:59,880 --> 00:19:01,880 their real time advantages. 537 00:19:01,880 --> 00:19:06,160 Their global reach and how they're constantly evolving. 538 00:19:06,160 --> 00:19:08,440 And we talked about how important it is 539 00:19:08,440 --> 00:19:11,400 to understand those big economic trends. 540 00:19:11,400 --> 00:19:14,360 Absolutely, those wins and tides that shape everything. 541 00:19:14,360 --> 00:19:16,000 Okay, so as we wrap up, 542 00:19:16,000 --> 00:19:18,800 what's the one big takeaway 543 00:19:18,800 --> 00:19:21,360 you want our listener to remember? 544 00:19:21,360 --> 00:19:22,440 I would say this. 545 00:19:22,440 --> 00:19:23,280 Okay. 546 00:19:23,280 --> 00:19:25,840 ETFs are more than just investments. 547 00:19:25,840 --> 00:19:26,680 Okay. 548 00:19:26,680 --> 00:19:29,360 They reflect this dynamic interplay 549 00:19:29,360 --> 00:19:34,360 between economics, technology, and human behavior. 550 00:19:34,680 --> 00:19:35,920 Wow, that's a good one. 551 00:19:35,920 --> 00:19:39,840 Yeah, and when investors understand those forces, 552 00:19:39,840 --> 00:19:43,520 they can really use the power of ETFs 553 00:19:43,520 --> 00:19:47,440 to build portfolios that are not only profitable, 554 00:19:47,440 --> 00:19:50,320 but also like aligned with their values 555 00:19:50,320 --> 00:19:51,800 and their vision for the future. 556 00:19:51,800 --> 00:19:52,960 I love that. 557 00:19:52,960 --> 00:19:54,880 It's been great exploring this with you. 558 00:19:54,880 --> 00:19:56,200 It has, it's been a pleasure. 559 00:19:56,200 --> 00:19:58,200 And to our listener, thanks for joining us. 560 00:19:58,200 --> 00:19:59,040 Thank you. 561 00:19:59,040 --> 00:20:01,280 Let's dive into ETFs. 562 00:20:01,280 --> 00:20:02,440 We hope you found it. 563 00:20:02,440 --> 00:20:04,360 Yeah, we hope it was informative. 564 00:20:04,360 --> 00:20:05,480 And inspiring. 565 00:20:05,480 --> 00:20:07,760 And remember the journey of investing. 566 00:20:07,760 --> 00:20:08,600 Yeah. 567 00:20:08,600 --> 00:20:09,440 It never ends. 568 00:20:09,440 --> 00:20:10,280 It's a lifelong journey. 569 00:20:10,280 --> 00:20:11,440 So stay curious. 570 00:20:11,440 --> 00:20:12,280 Yeah. 571 00:20:12,280 --> 00:20:13,120 Stay informed. 572 00:20:13,120 --> 00:20:14,440 Stay engaged. 573 00:20:14,440 --> 00:20:16,520 And never stop exploring. 574 00:20:16,520 --> 00:20:29,240 Never stop learning.