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December 8, 2022

Financials Matter

"It's Not Just About Finance"

6,500 ETF’s vs 3,500 Stocks

Sorry, but this is another rant that falls into the “Why I Hate ETF’s” category.  And the subject line tells the whole story.

Let me explain…

There are nearly twice as many ETF’s (Exchange Traded Funds) out there as there are available stocks.

And they all boast about them being the best way for you to diversify your holdings.

It’s hard not to laugh at these claims when you apply some simple math.

To prove a point, let’s use oil companies as an example to illustrate some faults.

  • If you assume there are 100 Major Oil Companies (There’s nowhere near 100 majors) and you have 6,500 ETF’s that could possibly buy them, don’t you think there’s a great chance of “overlapping?” (owning the same stock in more than one fund)
  • The top ten holdings in most ETF’s usually make up less than 25% of the total fund. That means that even if one of the funds stocks goes up 20% in one day, you still won’t see your fund go up very much.
  • When you have 6,500 fund managers chasing the same 3,500 stocks (most of which don’t qualify to belong in many ETF’s) you increase the chances of a panic. If, all of a sudden, everyone wants to sell the same stock who will be the buyer…and at what price?

Are you starting to see how complicated this can be?

And who do you think gets the short end of the stick when the markets crash?

Stop being victimized by these Wall Street thieves.

Find out more (HERE).

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