Episode 1266
In this deep dive, we explore the explosive growth of Exchange-Traded Funds (ETFs), an investment vehicle that has transformed global markets since the launch of the "Spider" (SPY) in 1993. We break down exactly what an ETF is—a fund traded on stock exchanges that holds assets ranging from stocks and bonds to gold bars—and explain the unique "creation unit" arbitrage mechanism designed to keep share prices aligned with net asset value.
Listeners will learn how ETFs differ from traditional mutual funds, specifically regarding their ability to be traded throughout the day, their lower expense ratios, and their superior tax efficiency for United States investors. We also examine the vast diversity of modern ETFs, moving beyond simple index tracking to include actively managed funds, thematic investments like AI, and the recent regulatory approval of spot cryptocurrency ETFs for Bitcoin and Ethereum.
Finally, we discuss the risks and criticisms facing the industry, including the "volatility drag" associated with leveraged ETFs and concerns regarding how these funds influence market stability during flash crashes. Join us to understand how an instrument that began in Canada has grown to control trillions of dollars in assets worldwide.
Published on 1 day, 9 hours ago
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