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Author: Alexander Sugiura, Adriana Tapia Zafra, Bloomberg; Compilation: White Water
The investment of the Exchange Trading Fund (ETF) is close to $ 13 trillion.These ETFs reflect the Standard Purcelling 500 index.Gold ETF, Bitcoin ETF, and even a vegetarian ETF.How does this market become so huge and diverse?What are the contents?
According to Bloomberg industry research, Berlaide’s Ishares Ethereum Trust ETF (ETHA) trading volume reached US $ 248 million, setting one of the highest transactions in the first day of history.Photographer: Victor J. Blue/Blowberg
Among today’s podcasts, we continued to invite Bloomberg intelligence analysts and Trillions podcast co -host Eric Balchunas.He told the host David Gura about the unexpected two -person group, and they created the first ETF in history as the last fight to save the trades.Katie Greifeld, co -host of Bloomberg ETF IQ and Money Stuff, analyzed the current booming market, and outline which ETFs are safe investment and which ETFs are best not to invest.
The following is the dialogue record:
David gura:Sarah.
Sarah Holder:David.
Gura:Today I want you to enter the studio with me, because I have to ask you about ETF questions and your understanding of them.
Holder:Okay, ETF … I think what I usually hear is not to worry about all these stocks.
Gura:Um.
Holder:Just find an ETF and put all your money into the ETF basket.
Dave nadig:These things can really change our views on investment.
Zachary Mider:We have such a large loopholes that let us use it in a new and creative way.
Emily Graffeo:So in the past six months, 94% of ETFs have achieved positive returns.
MIDER:You know this is a big tax advantage for many people.
Gura:But Sarah, to be honest, I am not completely sure how they work, and why they are so popular.
Holder:Yes, I am not sure, why are they such a good investment, David?What exactly is there in them?How are they different from common funds or index funds?
Gura:These are all good questions, Sarah, I also have the same problem.
Holder:Thank God, I need it.
Gura:This is our series, and we will analyze the largest part of the financial system from time to time.We will see how they are formed, and what they mean for all of us.Even if you are a financial expert.
Holder:Or, if you just want to know more about your investment portfolio.
Gura:I promise everyone to gain something!
Holder:I am Sarah Holder.
Gura:I am David Gura.Exchange Trading Fund (ETF) is one of the stars in the investment community today.They have the status of Merrier Stricp: they are respected, loved, and worshiped by professional investors and amateur investors.
Since its birth more than 30 years ago, ETF has become one of the world’s most popular investment.But to understand how ETF develops and grows, we need to understand their origin.
In Bloomberg, we are fortunate to have reported ETF experts for decades: Eric Balchunas.
Eric Balchunas:I am a senior ETF analyst. I wrote, analyzed and discussed ETFs, and led a team consisting of about 10 people around the world. They engaged in the same work.
Gura:Do you have your favorite ETF?
Balchunas:It’s hard to choose the favorite.You know I like this thing very much.I won’t say like my child, I won’t go so far.
Gura:Eric theoryETF was born in the darkest period of … Wall Street.
James Limbach:In any case, this is the worst day in the history of the stock market.
Balchunas:On the Black Monday in October 1987, the stock market fell 24%.I mean, from a percentage point of view, this is a big number.This is equivalent to a quarter of the stock market.
Limbach:The decline of the Dow Jones Industrial Index was almost three times the highest record in the previous day.
Gura:After that collapse, the US Securities and Exchange Commission (SEC) wrote a report to analyze the cause of the collapse and put forward some suggestions to avoid the collapse again.
Eric said the middle part of the report hides a gentle suggestion from lawyers of the US Securities and Exchange Commission.
Balchunas:If we want to produce a certain market basket tool, what will happen to the New York Stock Exchange under our supervision?
Gura:Nate Most and Steve Bloom are not working on the New York Stock Exchange, but work on their competitors.
MOST is in his 70s.He is a Canadian physicist who has served in the army.
Balchunas:Steve Bloom’s partner is like Harvard’s prodigy, prodigy, and rocket scientists. Mathematics is very good and younger.So they are an interesting partner.I think Nate may be two to three times larger than Steve, um, but they cooperate well.
Gura:The problem is where they work:
Balchunas:At that time, the US Stock Exchange performed poorly.They are second only to the New York Stock Exchange and Nasdaq in terms of the number and transaction volume, ranking third.
Gura:The US Stock Exchange needs an advantage, and then MOST and Bloom received the report from the US Securities and Exchange Commission.The 800 -page “Black Monday” analysis report.
Balchunas:Well, Nate and Steve finished this book, they are really nerd, they said, wait.The market basket tool, SEC is asking it to approve it.Then do this.So without stocks will be listed here.So why don’t we invented something to create more transactions on our exchanges?
Gura:so,They began to try to design a market basket trading tool: things that can be bought and sold on the stock exchange, its role is similar to stocks, but it is actually a basket of stocks: a basket that reflects the market.
Balchunas:This idea was actually born from the minds of a lawyer of the US Securities and Exchange Commission, which is very interesting.This laid the foundation for finding and inventing ETF because they were really desperate.
Gura:But it is not easy to turn this idea into actual products that can be traded.
Balchunas:So the approach of Nate Most is a genius,The real secret of ETF is that he remembers his time on the Pacific Commodity Exchange, where you have something called a commodity warehouse.The product warehouse is where you store different products.For example, soybean oil.You go there and put soybean oil in a locker.You will get a accurate amount of soybean oil.Then you trades the receipt so you don’t have to move a lot of goods.
Then if you have a bunch of receipts and you want soybean oil, you can bring them to the locker, and then you can get it back to the oil.So Nate Most is like why we have no receipt, but for the Standard Purcell 500 index stocks.They will sit in this warehouse, but it is actually a custodian.Then, you get enough receipt, and then you can get back the stock.This is the so -called creation of redemption.
Therefore, this is really a genius, because it can keep receiving receipts all day and not to mess with the goods.They are actually associated with physical products in the well -known warehouse.
Gura:Our idea is to create a commodity warehouse for storing stocks, bonds or anything you want to bind together.The exchange trading fund was then born.
The first ETF was created by Nate Most and Steve Bloom, including all stocks in the Standard Poorot 500 Index. They called the “Standard Purcel Etf ETF”, referred to as SPDR.
Daofu Bank launched the ETF in 1993, which aroused widespread attention.
Balchunas:I remember the spiders hanging on the ceiling and distributed their hats.It was interesting that day. Well, they traded, and they traded 1 million shares on the first day.
Gura:On the first day, 1 million shares were traded.Eric said that in the end, the funds invested in ETF began to double year by year.This is because people are beginning to realize that ETF has some real advantages than other bundled investment (such as common funds or index funds).
Balchunas:Generally speaking, they are cheaper.right.So this is important.The second thing is that they are very transparent. You know, you know that their daily situations, and other common funds and hedge funds, you don’t know that you don’t even know each quarter.So the transparency is very good.
Gura:What is another major attraction of ETF?tax.ETF only needs to pay taxes at the time of sale.The common fund is taxed every year.But Eric believes that another major advantage of ETF is that unlike many investment in Wall Street, ETFs are very user -friendly.
Balchunas:Just like you have a computer and a mouse, no matter what you want to invest, you just need to click to buy it.You get it, you have it.This eliminates a lot of friction.It is almost like Amazon.You know, it is fast, good, and cheap.It is difficult to have these three aspects at the same time.
Gura:Today, about thirty years after the launch of SPDR, there are thousands of ETFs now, and the investment amount has reached trillions of dollars.
Later, we will provide users with a guide to introduce the best, worst and strange ETFs.
Gura:Speaking of the status quo of ETF, we found that there is another person in Bloomberg who is very obsessed with them.She is Katie Greifield:
Katie Greifeld:I am a co -host of Bloomberg TV Open Interest show.I wrote an ETFIQ briefing for Bloomberg News.I also hosted the TV program Bloomberg ETFIQ, and also co -hosted Money Stuff Podcast with Matt Levine.
Gura:Katie has a lot of jobs …
Greifeld:I’m so tired.
Gura:But she was very interested in ETF, so she let go of everything to talk about them.Katie, you tell me ETF is your favorite thing.It is indeed.Explain.Why is this?
Greifeld:I have reported ETF since January 2020. Well, January 2020 is a strange opportunity to enter a new field.But the most exciting thing and the reason why I think I like ETF is that during this time, I saw that the industry grew and develop at such a fast speed.
David Gura:Let me know how big the ETF industry has developed.
Greifeld:The industry is huge and grows.so,The market value of ETFs listed in the United States is about $ 95 trillion.
Gura:Emergency, start with T.
Greifeld:Oh, yes.Well,The world is about $ 12.8 trillion.
Gura:Now, this is less than half of the size of the common fund market -the common fund is the traditional choice of more conservative investors.But ETF is progressing.
All thisA large part of the growth is that ETF and common funds are regarded as safe investment.Coupled with the low cost of ETF, they are very attractive to those who want a safe and low -cost savings place.
Greifeld:This is one of my favorite charts. I know that we are broadcasting customers, but if you look at the funds that flow into ETFs and flow out of common funds every year, you will find some years, which is basically a zero -sum game.
Gura:But not all ETFs are the same.There are gold ETFs, Golden ETFs, Corn Futures ETFs, and ETFs with Nvidia Stocks.Now, there are spot Bitcoin ETFs … they are one of the most popular ETFs.
Gura:How do they work?Did Black buy a lot of Bitcoin and hold it?
Greifeld:This is basically that.Uh, I found that it is more helpful to make it with the spot gold ETF.Because spot gold ETFs do have to buy a lot of gold.
Gura:It must have actual things as backing.
Greifeld:Yes.There are many conspirators that State Street cannot have so much gold.
But they do have it.They stored gold in a vault in London and underground in London.If you look at the spot Bitcoin ETF.You did buy a lot of bitcoin like companies like Fidelity and Blackrolk.The same is true of Ethereum.
Gura:I suddenly thought,We see this ETFization of various assets.For example, can you really get an ETF tracking anything?
Greifeld:Yes, almost yes.Almost everything in the world has ETF.
Gura:Every stock recommended by the C-N-B-C Jim Cramer has ETF for investment.In addition, there is a reverse Cramer tracker, which bets all the stocks selected by Jim Cramer.
Both companies closed last year, but other similar companies were launched every day.Katie said that many such companies are not designed for ordinary investors, and they are more suitable for exercise.
Greifeld:NVIDIA: Especially a single stock ETF, Tesla, so it is absolutely interesting to watch these stocks every day because they rose tens of thousands of times and then fell tens of thousands of times.
Gura:I ask what the next step of Katie ETF is.
Greifeld:An interesting conversation that is currently happening in the industry is whether you can put private assets into ETFs.The private market is now very popular, uh, especially those companies that are no longer listed.
Gura:However, even if the number of ETFs surged, the number of companies that made money from it still concentrated in some well -known companies.
Greifeld:ETF’s economic benefits are poor because their prices are often much cheaper than common funds.In my opinion, Pioneer Group is the second largest ETF publisher, second only to Berlaide, which is very interesting.Bloomberg intelligence found that their average cost is only 9 basis points.Although their ETF assets are close to $ 2.5 trillion, they only earn 1.3 billion US dollars each year, which is not a small number.I accept it.But you may think that if the size of the asset reaches $ 25 trillion, then this number will be higher.so,The real way to make money here is through scale.
Gura:Now,There are some disadvantages of ETF’s surge.Bloomberg Intelligence ETF analyst Eric Baltchunas said,Because they are very easy to use … and are easy to start, problems may occur.
Balchunas:If you can’t control yourself, and you are like, you,You are like a gambling mentality.For example, you know,You may want to buy a common fund, even if there is a common fund with an early withdrawal fee, if it can help you trade, then ETF may be very dangerous.
Gura:Many safer and more obvious investment have been covered, Eric said.Therefore, many new ETFs may be a bit out of time.
Balchunas:This is a bit like Franknetf, as if no one launch ordinary things.They are trying to invent new things that attract investors.This is where you are caught in Franknetf.
Gura:In fact, the appearance of Franknetf worried the legendary character of Pioneer Group.
He was an early supporter of the Index Fund and provided them with suggestions when developing ETFs in Nate Most and Steve Bloom.
According to Eric, when Bog saw that everyone was using ETF to play creativity, he was worried.
Balchunas:Bog said that he sometimes felt like Dr. Frankenstein when he woke up because he could be said to be the father of index funds.He would think, what did they do to my son?
Gura:Except for Franknetf, Eric and Katie, they all agree. Generally speaking,More basic ETFs get all the hype.
They are transparent, easy to use, and lower costs.
All of this was attributed to the market collapse in 1987. The thought of a SEC lawyer and two traders with entrepreneurial spirit afterwards, they saw the opportunity, and Sarah … this made me think.
Holder:Yeah?
Gura:Maybe we should launch our own ETF …
Holder:Really?Like Big Take Away ETF?
Gura:real.
Holder:Okay, do you mean a podcast -related stock?I have no idea……
Gura:Yes … this does not seem to be a good idea, but I do put forward this idea to Eric Balchunus.He agreed to provide suggestions for our launch.
Balchunas:Well, the stock code can be taken.Well, if you have topics and guests, you can basically invest in that field.
Until the next show was broadcast, and then traded to different fields to see what would happen.
Gura:So what do you think of Sarah, take etf?What kind of news investment should we consider?
Holder:Simple -we will do more for the 2024 election, and invest in Korean pop music targeted, we must participate in the Olympic Games -but honestly -we only bet Brat.
