I love ETF investing but there’s two things I don’t love, the fees and the fact there is no all-in-one exchange traded fund you can buy with all the stocks you want. There is no best ETF to buy. In fact, investing in an ETF with thousands of stocks means you’re probably getting a lot of stocks the portfolio manager doesn’t even like. I’m changing that with this video and showing you how to create your own custom ETF with NO fees!
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Of the two problems I have with ETF investing, the fees aren’t really that big of an issue. Most funds follow an index or are passively managed so the fees don’t amount to much anyway. It’s the lack of customization and the need to buy many funds that I really hate. There’s no singular fund with all the stocks and investing themes I want like dividends and growth.
Even worse, most funds invest in hundreds or thousands of stocks. The top stock in the portfolio may be up to 10% of the total assets while the smallest holding, less than a percent. You can’t tell me the fund manager has as much confidence in that last stock as with the first…so why even include it? Why make me invest in that throw-away stock if I want to buy the ETF?
In this video, I’ll explain ETFs and show you why the idea is such a great one for your portfolio. I’ll share the pros and cons of ETF investing and why I’m creating my own. Then I’ll reveal how to create your own super exchange traded fund, the best ETF to buy for your needs.
Going to the homepage for any exchange traded fund, or using the new tool on Stockcard, you can see the top holdings for the ETF. This will also show you what percentage of fund assets are in each stock. This is how we’re going to create our super ETF, buy picking out the stocks with the highest conviction from the portfolio manager.
I’ll use the ARK Invest ETFs as an example in this video. We’ll go through each of the six ARK Funds to find the biggest stock holdings in each ETF and put them in a separate portfolio. What we’ll create is a 20-stock portfolio that represents 44% of the total assets in the ARK Funds. That 20 stocks is almost half the assets in the 160+ stock portfolio across six funds. If these are the stocks in which the ARK portfolio managers truly have the most confidence in returns, then this portfolio should outperform the broader funds…let’s see how they do.
0:00 How to Create the Best ETF with No Fees
0:24 Two Problems with ETF Investing
1:53 What are Exchange Traded Funds?
2:14 ETF Examples
2:45 Pros and Cons of ETFs
4:34 How to Build Your Own Custom Exchange Traded Fund
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Joseph Hogue, CFA spent nearly a decade as an investment analyst for institutional firms and banks. He now helps people understand their financial lives through debt payoff strategies, investing and ways to save more money. He has appeared on Bloomberg and on sites like CNBC and Morningstar. He holds the Chartered Financial Analyst (CFA) designation and is a veteran of the Marine Corps.
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