At the end of The Canadian Couch Potato Podcast 26 Dan Bortolotti signs off with the news that he will indefinitely suspend the more than popular podcast. It has been a wonderful resource for so many Canadian investors. And certainly so many investors are now on track with a sensible investment portfolio thanks to Dan and these easy-to-listen-to presentations. Thanks Dan, so much.
Here’s the link to the final podcast ETF Deep Dive With Erika Toth.
Erika is a director of BMO ETFs and is a wonderful resource for everything you ever wanted to know about ETFs. This is a podcast packed with a wide range of not-well-understood bits and pieces for ETF investors, advisors and accountants.
How your ETFs are made
As was discussed on Cut The Crap Investing, ETFs do not trade like individual stocks that are based on simple market liquidity or exchange between buyers and sellers. Erika frames it nicely by reminding us that a stock has a finite number of shares whereas an ETF is an open structure. They can create more more units on a daily basis. They can retire units as well.
Erika offers that the are 3 levels of liquidity, from the natural buying and selling of existing units between ETF investors, to the market makers and on to the ETF provider. Dan reminds us that in the end the liquidity also comes down to the liquidity of the underlying assets.
Here’s my post Ever wonder who makes your ETF and how it stays on track?
On those dangerous ETFs
Erika and Dan address the fear mongers who state that widespread ETF ownership will distort the markets and create risks and mis-pricing. Erika suggest that you consider the source when you hear or read of this ETF bashing; it usually comes from the active managers who are bleeding assets.
Can the buying of ETF shares drive up the markets? The ‘investable world’ and comparative ETF ownership is quite small at 6% on the stock side and 2% on bond side. That’s not what drives the markets. It’s the active managers who still price the stocks and bonds.
Erika also addresses the ridiculous notion that lack of liquidity of underlying assets can create risks for ETF investors. The podcast mentions studies that deliver a smack down to these fears including a situation where ETFs saved the day when the high yield market froze up during the financial crises. The ETFs continued to trade and price the sector.
Trading tips for ETF investors.
The podcast also offers some best practices for ETF investors. As was discussed on this site, generally and mostly we should use Limit Orders when we buy and sell. Erika also offers some wonderful insights on how ETFs are priced when certain markets are not trading. For example, yes you can buy a US stock market ETF when the US markets are closed as the market makers can use the futures markets (always open) to price the ETFs. That said, this scenario presents more risk for ‘mispricing’ as the ETF market maker will often compensate for the additional risk that they are taking on. Erika and Dan suggest you trade those US markets when they are open for business.
Related post: How To Place Buy And Sell Orders For Your ETFs.
Taxes and fees and ACB
Erika offers insights on how ETFs take their cut, how income is created and delivered and how capital gains are created by that re-balancing and currency hedging. There is also an important reminder on the importance of tracking your own ACB (adjusted cost base) in taxable accounts.
Where to next? Erika suggests that in 5 years the Canadian ETF market could grow to $400 billion. The ETF assets doubled from 2014 to present. Dan also echoed my thoughts that the ETF market is being made more complex and in turn more confusing for self-directed investors. I had shared that thought in this post, here’s From inside the Inside ETFs conference – the state of the ETF nation.
Have a listen to Podcast 26. And you can go back and listen to the first 25. If you do, you might become more than well versed in all things ETF and index-based investing. Thanks Dan. Thankfully blog posts will continue on Canadian Couch Potato.
Boomer and Echo also penned on the Canadian Couch Potato podcast. Robb also commented on the bad advice segment.
Myownadvisor looks at Ways to get ready for retirement plus a nice compilation of weekend reads.
On FindependenceHub thanks to Jonathan for sharing Adding Canadian and International REITs from Cut The Crap Investing. And this post suggests that retirement planning should now focus on financing for longevity risks.
On MoneySense Jason Heath looks at your options for unused RESP assets.
The Dividend Guy looks at investors who might be sitting on a pot of monies and suffer from that investor paralysis. Here is Invest Now, or What? I had penned on that subject for the Tangerine blog with Money Sitting in Savings? Now What?
And this week I did a bunch of reading and research based on my post from last weekend that covered Horizons move to a corporate structure. I had ongoing conversations and email exchanges with Horizons CEO Steve Hawkins. Thanks for your help on that. Here is the updated post Horizons makes the move to block the government’s tax grab. And on Seeking Alpha I returned with another bit inspired by Captain Obvious Investing In Individual Stocks Takes Incredible Patience.
Thanks for reading and sharing. Drop a comment. And have yourself a great long weekend.