WTF is an ETF and why should you invest
in them? Well you've probably all seen a
chart like this at some point in your
life, where some guy was like look the
American market has done over 11% in the
last 80 years, or the Canadian market has
done 9.8% percent over the last 80 years
and the bond market has done over 6
percent for the last 80 years and you're
probably thinking yourself well who
cares? I'm not getting returns like that.
I would do anything to get returns like
that. I'd basically punch a kitten in the
face to get returns like that. Let me
tell you, never punch a kitten in the
face. But how come you're not getting
returns like that? Well that's because
you're investing in mutual funds or with
a stockbroker, who's now called a
portfolio manager that is saying you
know what, I'm going to pick which stocks
you want to buy and I'm so smart that I
can actually predict the future, so I'm
going to pick your stocks for you and
you're going to pay me somewhere in
between 1.8 and 3% to do this and you're
like, great!! Well guess what? It turns out
that almost every single one of these
guys doesn't know how to predict the
future, which is absolutely crazy who
would have thought that? So they're
losing to the market almost 90% of the
time. So what can you do? How do you
invest just in the market? Well you can't
quite do that, but that's where an ETF
comes in. So if you buy an ETF what it's
job is to do is to track a specific
index, so in this case I'm just going to
talk about the S&P 500 which is the
index that has 500 large American
companies and that's showing what those
500 companies are doing.
So if you bought $100 worth of an
American S&P 500 index fund and let's
say Apple made up 3% of the market and
Walmart made up 1% of the market you
would own 3 dollars worth of Apple
and $1 dollar of Walmart and when they
change the ETF will just change with
them. It's not doing anything in
particular special and for that it's
charging about 0.1% so it's a little bit
off of what the exact market is doing,
but it's way less than that 2.50%
you're probably paying for
the mutual fund that says it's doing the
exact same thing. Now you can understand
why banks and financial advisors aren't
running around showing you these things,
because how are they supposed to make
money? So they say well okay I'm going to
sell you this ETF with a fee of 0.1 percent
or this mutual fund with a fee of 2.5
percent on a hundred thousand dollars.
that's $2,500 going to the bank compared
to a $100 every year.
Of course they're not selling these
things to you. So how do you invest in
these if you want? Well there's one of
three ways: First thing you can do is you
can say okay I'm going to open up my own account
and I'm going to manage it myself and
that will be almost free. This is
actually really easy to do and you can
read some blogs on the internet that
will tell you how to do it and take a
little bit of time and if you're a
hands-on type of person do that. You'll
get good returns. If you're not that type
of a hands-on type of person, but you
like this idea of investing and don't
want any advice then go and work with a
company like WealthSimple or another
robo-advisor and just buy them and
they'll manage your portfolio for you
for a small fee. So they're charging
about 0.5% on top of what the ETFs are
charging. Not bad.
And then third, your option is; oh I don't
really understand this stuff. I like Kent. He's
saying these things. I think he
actually knows what he's talking about,
which is weird.
And on top of that, so I'll say go invest
there, but I'm going to give you
financial advice, make sense of all this
garbage for you, I'm going to give you a
plan for the future, and you can come to
me with all your questions and then on
top of what they're charging I'm
going to get a commission of 0.6%
on your portfolio. So if you have
$100,000 I'm going to make six hundred
dollars a year. And I'm going to tell you
to invest with them if it makes sense.
Sometimes it doesn't, so you just come to
me, I'll give you advice and that's how I
think you should invest your money.
There's one of three ways. It's simple.
Save some fees. Get some better returns.
Thanks.