Quote:
Originally Posted by reckless
ETFs are the absolute worst investments an investor could make. Ignore all the TV chatter about them. They are very risky and ETF buyers must own the bad and poorly run companies as well as the Apple, Netflix, Gilead holdings they may have in that ETF portfolio.
Also, most ETFs are more expensive than many of the same individual companies they may hold, such as those I named above.
Buying individual companies at the right price is the only ticket to stock investing success. All three named above are selling at a fraction of their intrinsic value, even Netflix, a stock now kissing $420 -- $300 dollars more than when I was first asked about it on this very site.
If Netflix worries you because of the sharp run-up, then Apple, Accenture, Gilead, Johnson and Johnson, Lazard, Master Card and a few more unnamed smaller companies are still dirt cheap by my methodology and analysis.
Don't be afraid. The business media will destroy the frightened investor of all stripes with their doom and gloom and mistaken analysis. Ignore them and those hack experts they interview.
I will not mislead you -- go for it but be smart and judicious.
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I’m going to chime in here agreeing with reckless on the issue of ETF’s and mutual funds in general. The biggest flaw in their structure is that managers are hamstrung by withdrawals and the need to sell assets into market downturns as their retail base panics. The theoretical best money manager in the world simply HAS TO SELL regardless of the buying opportunities presented when they are faced with a declining market and demand for withdrawals.
It’s a case of the client telling the experienced manager what to do. Regardless of your own risk tolerance, you are along for that ride when you own an ETF or mutual fund.
I make a carve out for closed end funds where the fixed number of shares eliminates that risk. It also opens up the opportunity to own shares at below NAV. The bond portion of my portfolio is divided into 3 CEF’s co-managed by 3 of the best bond managers on the planet and I’m still shocked that I was able to buy each at a significant discount to their actual value.
There are plenty of other risks in this space (leverage and high management fees are common) but for me the 40% of my portfolio in bonds isn’t something I can manage on my own and this has turned out (so far) to have been a great solution.
There are lots of equity CEF’s also. It’s a space that has little coverage in most of the business media. But if you want to own a professionally managed portfolio and like the idea of buying $100 in stock for $95, CEF’s can offer that opportunity.
