Investing in ETFs has been the hottest trend in the last 10 years. However, this also piles up the risks of a stock market crash, and a fast one!
I discuss what could a reversal of the ETF trend do to stocks.


  1. On the plus side ETF's can be commission-free and I've seen expense ratios as low as 0.03% (much less than mutual funds). There are tax advantages compared to mutual funds as well.

  2. Sven, noticed you've done a lot of research on gold miners. Would you consider selling a watch list of the best of the best companies in the sector along with the very highest quality juniors?

  3. There are also active ETFs but generally they are worse. ETFs still have lower risk than individual stocks. But I agree that there is limit how much money can be passive.

  4. Very interesting video again! Also, what do you think about venezuela bonds? The ones with an expiry date of 26-31 are at 30% right now. The yield is at 12% per year (And until now they actually paid the yield). Even though there are huge risks there is also potential since oil bounced back a lot from the point where it destroyed the venezuelean (dont know if thats spelled correctly) economy.

  5. Passive ETFs outperform 80% of active funds, because they're disciplined large cap strategies which charge almost nothing.

    As for the dangers of ETFs, surely this theory was tested to destruction in 2008/09?

  6. But but… Buffett told everyone to invest in a cheap S&P500 ETF @ 90% and Bonds @ 10%! So it must be a good idea! ok i know that's not exactly what he said but many seemed to take it that way.

  7. I like VOO, isn't it a relatively safe ETF, compare too the other ones? I trust Vanguard, and it can only move like the S&P…

  8. I think you are right. Heck I noticed the other week that QQQ powershares sponsored a Nascar race lol. That had to cost big bucks and is another way to get people to pile more money into their funds in order to keep them afloat.

  9. Sven, how does your analysis/view change with inverse ETF's like the SDS (ProShares UltraShort S&P 500)? If you want to short the market, these ETF's seem to be better than put options because they do not have a maturity date.

  10. Great topic. Adding to what you've said

    (1) Liquidity — ETFs are similar to closed-end funds (CEFs) in that when markets are stressed and liquidity dries up, they may not trade anywhere near their NAVs (net asset values). ETF investors need to know and understand this.

    (2) More on Liquidity — Your Junior Miner example is EXCELLENT! If that ETF comes under selling pressure, it has to sell the individual components proportionally. This is non-optional — the ETF MUST sell, regardless of what the price is. For small cap junior mining stocks with low volumes, it's an absolute guarantee that the individual names that ETF must sell will see the spread between bid and ask blow out, and the bid will walk. The ETF holders WILL get screwed. This is VERY different than holding the names individually in a portfolio where you can control the timing of your selling. Same is true of buying. When ETFs rebalance, they MUST buy regardless of price action.

    (3) Because Index ETFs are forced to buy the individual stocks that make up the index in proportion to their size in the index. That means ETFs are FORCED to buy MORE of the stocks with the most expensive valuations and LESS of the stocks with the more favorable valuation. This is a recipe for success in momentum-oriented bull market phases, but it's a different story in any market climate where there is reversion to the mean, and will be disadvantageous in a bear market. It's great to own the darling stocks of any bull market on the way up. Its' downright toxic to have them disproportionately filling up your basket when the clock strikes midnight.

  11. Another great video Sven! I do agree with you that ETF/passive investing will be a key contributor in the fall of the stock market at the end of this credit cycle, but I still believe ETFs are very attractive. There is so much momentum behind passive investing and I don’t believe will dissipate after the next downturn. So if you buy the etfs at the start of the credit cycle when central banks start lowering interest rates and quantitative easing, you can still make a lot of money as “dumb money” flows into the etfs in the next credit cycle.


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