Join Early Retirement Today
Thread Tools Search this Thread Display Modes
Crazy new ETF-alternative (customize your own!)
Old 09-13-2014, 12:00 PM   #1
Thinks s/he gets paid by the post
MooreBonds's Avatar
Join Date: Aug 2004
Location: St. Louis
Posts: 1,890
Crazy new ETF-alternative (customize your own!)

I'm not exactly sure how they can afford to do this with such a low commission (perhaps the company is selling you full/fractional shares out of their own inventory at a mark-up to pocket the difference?), but The Motley Fool has an article on a new ETF-alternative, where there is a ZERO annual expense ratio!:

Will This Start-up Kill the ETF Revolution? (BLK, DLTR, ETFC, STT, WMT)

Basically, this company offers pre-defined ETFs with portfolios listing what stocks they own - or, you can make up your own customized ETF with any stocks. The catch (and a HUGE MAJOR downside): in order to have a zero expense ratio, apparently you are buying each individual stock in that ETF as an individual purchase, rather than buying just X shares of an S&P 500 ETF (for example). So if you bought their S&P 500 "ETF", you would effective be buying 500 individual positions!!!

The good side: you can pay just a very small transaction for each security for a widely diversified portfolio.

Still, a very interesting concept. Assuming long-term, if there is a way to very simply track all of those transactions, it would be a huge challenge to ETF managers.

Dryer sheets Schmyer sheets
MooreBonds is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-15-2014, 01:15 PM   #2
Thinks s/he gets paid by the post
photoguy's Avatar
Join Date: Jun 2010
Posts: 2,228
This looks really interesting but the article is unclear as to how the company affords the trades. I'd be afraid they were selling order flow. But perhaps they are just eating the trading costs to obtain customers or have negotiated to deals to get very low cost trades (possibly using their own inventory as you suggest).

I'm not actually sure what is the lower bound on trading costs for a large company (as opposed to individual investor). But so many companies are giving away free trades that it cannot be much.

Also interesting to me is the royalty program whereby if others buy your index of 30 stocks then you get paid.

photoguy is offline   Reply With Quote
Old 09-18-2014, 08:45 AM   #3
Full time employment: Posting here.
CCdaCE's Avatar
Join Date: Apr 2006
Posts: 887
I'm guessing bid/ask spread is where you're taking it in the shorts.

But I didn't stay at a Haul-a-Day Inn last nite, so who knows. The hard part is even knowing whether you got taken to the cleaners. How would you even calculate this if you put $100 total into 30 different shares. Just saying it'd be a lot of legwork and you'd have to know the spread over those 30 stocks over an unknown interval of time when the trades were actually executed. Tax prep. man would kill you. Maybe you could simplify the calculation to see where you're losing and end up with cheaper trades you butcher it up so your motif only consists of 2 or 5 stocks?

"There's those thinkin' more or less, less is more, but if less is more, how you keepin' score?
It means for every point you make, your level drops. Kinda like you're startin' from the top..." "Society" - Eddie Vedder
CCdaCE is offline   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Crazy, or a New Normal? haha FIRE and Money 14 06-14-2013 01:29 PM
Am I crazy, or is this 'Financial Advisor' crazy? Coderguy Young Dreamers 26 06-08-2011 07:02 PM
New ETF: Sudan-Free social ETF Olav23 FIRE and Money 2 06-28-2007 09:03 AM
Is Your Boss Crazy? Calgary_Girl Other topics 6 06-15-2007 06:56 PM
Things own you; you don't own things - know what is want and a need dex Young Dreamers 21 10-26-2005 12:40 PM


All times are GMT -6. The time now is 09:51 PM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2016, vBulletin Solutions, Inc.