Jack Bogle: Beware The Meteoric Rise Of ETFs
You know, ETFs aren't as safe as they may seem.
This became readily apparent in 2015 when Reuters reported - in a piece that was largely ignored - that some of the top ETF providers were seeking to secure lines of credit that would be available in the event liquidity became a problem.
The issue still isn't well understood. For something like a high yield bond ETF, the underlying securities aren't liquid. The ETF units are, but only because the flows are still diversifiable. That just means tha
Excellent observations. Etfs are merely another financial weapon of mass destruction, to borrow from Warren Buffet, and Paul Volker is still right: The financial industry has grown from five to twenty percent of GDP and we have only ATM machines to show for it. Perhaps he exaggerated; we also have $225 Trillion of global debt to show for it.
And Bogle is also still right in his assertion that the investor gets about 1/4th of market returns over time. Then, financial services gets 1/4th “managing ” his money and goading him to trade and “advising” how to do it. The tax man gets 1/4th and has an obvious vested interest in high turnover. Buying high and selling low, slippage, etc. gets the other 1/4th.
Watching it all leaves me feeling like a teetotaler at a roaring drunk party. I don’t think I’m alone, but I also no longer even care if I am.
Well put