Seeking Alpha

SA Editor Jonat...'s  Instablog

SA Editor Jonathan Liss
Send Message
Jonathan Liss is Seeking Alpha's ETF Product Strategist. Before moving over to the Sales Product team, he was Managing Editor for ETF & Portfolio Strategy content. He first joined Seeking Alpha's staff in May 2006, making him one of the company's longest serving employees. He is interested... More
View SA Editor Jonathan Liss' Instablogs on:
  • Commission-Free ETF Trades: What About the Other Deep Discount Brokers?

    On Tuesday Vanguard became the third deep-discount online broker to offer its account holders select commission-freeETF trader, in this case on its own U.S.-based ETFs, of which there are currently 45.

    As a holder of two Vanguard ETFs (VWO, BND) which I hold for myself and my two kids (in separate custodial accounts) in a TD Ameritrade (AMTD) brokerage account, I decided to let AMTD know that I was considering switching my business over to Vanguard unless they had plans to launch similar commission-free ETF trading for their brokerage clients. After all, Fidelity is allowing its brokerage customers to trade iShares ETFs commission-free now so why shouldn't AMTD be able to work out a similar deal with a major ETF issuer with a diverse line of basic index funds like iShares or State Street?

    While friendly, the representative I spoke with informed me (after a querry with the 'back office') that AMTD had no plans to offer commission-free ETF trading in the near future. He knew I would be disappointed with that news but couldn't really find anything else of value to say to offset my concerns.

    Next, I decided to give E*TRADE Financial (ETFC) a call to see if maybe TD Ameritrade's lack of pursuit of commission-free ETF trading was somehow an outlier. The response I got was nearly identical - beyond the 60-day free trading period when you first open an account, there were no plans for E*TRADE to offer commission-free ETF trading in the near future.

    As a result, I will in all likelihood leave TD Ameritrade as my brokerage account in the near future and switch over to one of the brokers currently offering free ETF trading. Even though we're not talking heavy trading (I make between 5 and 10 trades a year total between my own and my two kids' accounts), the $100 to $200 I spend a year on trading (each trade generally involves a sale and a purchase meaning $20 in commission) will add up over time, especially when you consider the effects of compounding interest.

    Additionally, commission costs have stopped me from making moves on several occassions: better not to spend $20 (or what works out to 1% on a $2,000 position), my thinking went, unless I'm fairly certain I'm making the right move. Having free trading would allow me to chase alpha far more actively, something that has been difficult until now with the relatively prohibitive cost of trading commissions, even at deep-discount brokers.

    Disclosure: Long VWO, BND
    May 06 1:39 PM | Link | Comment!
  • Why QQQQ Was My Conviction Pick for 2009
    For a broad U.S. Market Index, PowerShares QQQ ETF (QQQQ), which tracks the Nasdaq 100 Index had a hell of a year - up 55% as of today's close. It handilly outperformed a range of broad market equivalents including SPY, DIA, IYY, VTI and IWV. Even growth-heavy (and thus more similar stylistically) IWZ and IVW underperformed QQQQ by nearly 20 points or more.

    click to enlarge

    To me, an ETF's underlying holdings are key. In QQQQ's case, the heavy weighting towards a few tech names - most notably Apple (NASDAQ:AAPL) which was upwards of 15% of the fund as of today's close - made the fund an easy choice for me to load up on for both my own and my kids' college funds over any of the other broad index funds mentioned above.

    IndexUniverse Editor in Chief Matt Hougan made the following points about the QQQQ back in November 2007:

    I've pointed this out time and again, but the Nasdaq-100 is a flawed index. First, many people take it as a proxy for "technology," which it is not: only 65% of the fund is devoted to technology, with the rest tied up in healthcare, consumer discretionary and more.

    But more importantly, the index's unusual weighting methodology — somewhere between market cap weighting and price weighting — means that the weights assigned different components are entirely out of whack. For instance, Microsoft (NASDAQ:MSFT) is twice as large a company as Apple (AAPL) ($346 billion vs. $164 billion), but Apple has twice the weight of Microsoft in the index (12.3% vs. 6.5%). The fund is also very concentrated in its largest holdings, with 46% of the fund in the top 10 holdings.

    To me, this is what makes QQQQ so appealing: I'd rather have a tech-heavy broad index fund then one with heavy weights in other sectors. Tech is the last thing the U.S. actually still produces. The next largest sector in the QQQQ, Healthcare (15.5%), made this fund even more appealing in the uncertain market environment we've been in due to its status as a traditionally highly recession-proof industry.

    And I like the fact that Apple is given more than twice the weight of Microsoft. If things were reversed, I wouldn't go near this fund. Microsoft's stock is fine in small doses (I've profited off of it in the past) but Apple's nearly unlimited growth potential makes it a much more appealing top holding.

    Disclosure: Seeking Alpha has very strict rules governing employees buying and selling individual equities - another reason the QQQQ makes sense for me. It gives me all the Apple exposure I want with additional great companies like Cisco, Intel, Google and Teva. I have owned the QQQQ since mid-2007 but upped my position considerably in January and February of 2009.
    Dec 30 6:41 PM | Link | Comment!
  • My Favorite ETF Articles Appearing on SA: May 25-26

    Since we are now publishing upwards of 10 ETF-specific articles on Seeking Alpha a day, the task of reading through this all can be daunting to even our most dedicated readers. As an editor with a specific interest in the Exchange Traded Products (a broader term that includes ETNs and other difficult to classify products such as the MacroShares Up/Down funds), I decided to take upon myself the task of instablogging what I feel to be 'greatest hits' from our ETF Center.

    My opinions in no way reflect those of Seeking Alpha; they're just one man's opinions. I too often miss great articles (I have a two-month old baby so there's no way for me to read it all) and may think something is great while you think it's no big deal.

    These pieces all appeared on Seeking Alpha over the last two days (May 25-56):

    Hard Assets Investor: Commodity Equity ETFs Get Active - What About Futures?

    Claymore Securities filed to launch three new actively managed commodity equity ETFs last week. HAI's Lara Crigger goes in depth into the filings, parsing the likely make-up of these products and the proposed management strategy.

    ETF Grind: Why Investors Should Avoid TIP

    According to the author: 'The TIP is a smartly designed fund with an attractive expense ratio and plenty of liquidity. But it has one fatal flaw: TIPs haven't been tested in truly inflationary times, and are thus a much riskier investment than most people think.'

    Andy Hagans: Building an All-ETF Ivy Endowment Portfolio

    There are money managers who can and do consistently beat the markets. Andy Hagans tries to help retail investors extraplate Yale Endowment's David Swenson's asset allocation model to a simple ETF portfolio.

    Michael Johnston: Under the Hood of 'Target Retirement Date' ETFs

    One of the latest ETF products to pick up steam are Target Date Funds, which seek to provide investors with a 'full' portfolio in a single fund, rebalancing in favor of less risk as the fund's target date approaches. The author goes behind the funds and examines their make-up while pointing out drawbacks such as 'double layering' of expenses and the overlooking of other asset allocation factors other than date of retirement.

    Tags: etfs
    May 27 11:30 AM | Link | 2 Comments
Full index of posts »
Latest Followers


More »

Latest Comments

Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.