ETFs for your Retirement Accounts ~ Kryptoin Couch Potato InvestingExchange Traded Funds provide a very good “couch potato” opportunity for your retirement account. What is a “couch potato” or “passive investing” strategy? Market is smarter than people think and very few individuals, based on superior analysis, can perhaps beat the market in the long run. In the short run, it becomes very tough to beat the market index.
The key advantage of ETFs is that you can invest in the Market itself instead of trying to beat the Market, which is a mammoth challenge, even using Artificial Intelligence. Benjamin Graham, once said, “In the short run the market is a voting machine, but in the long run it is a weighing machine”. The “couch potato” or “passive investing” strategy stems from this very fact. The key vehicle to use “couch potato” or “passive investing” is exchange traded funds. Exchange Traded Funds offer low cost diversification as well as exposure to multiple indices and stock markets. This diversification opportunity via ETFs will increase manifold as crypto currencies markets will grow exponentially in the new blockchain economy. Given the fact that the fundamentals of the markets are changing at a fast speed, the “passive investing” strategy is becoming a mega trend. No wonder that the ETFs growth has witnessed double-digit growth in the past few years.
Despite low cost diversification, ETFs are only suitable as an investing strategy for retirement, if your portfolio has at least $50,000 of investable funds. For lower amounts, there will be commissions to trade ETFs which can eat away the advantage of lower MERs (Marginal Expense Ratios). Low MERs are only beneficial if you achieve certain threshold in the size of investable money so that the commissions do not offset the advantages gained via lower MERs of ETFs. In that eventuality, index mutual funds might be more beneficial for smaller amounts. ETFs are suitable for you even if you make infrequent deposits but those deposits are not small enough to attract costly commissions on trading. These deposits should be of reasonable size to mitigate trade commissions and thereby leverage the low-cost diversification. Finally, you need to leverage different retirement and tax break accounts (like RRSP, TFSA in Canada) at certain size of investable money so as to harness the benefits of tax-efficiencies of ETFs.
One last question to address is why there is a huge mega trend for “couch potato” or “passive investing” via ETFs? The reason is that number one problem faced by the Asset Management Industry at this stage is shrinking margins due to higher costs related to compliance/regulations, as the KYC-AML processes have become more complex and spread across multiple jurisdictions. Mutual Funds are under lot of stress because of their relatively higher costs (Marginal Expense Ratio). Costs are playing very important role toward the rate of returns and are called as the “controllable” factor for fund returns. Alpha and other factors are considered as “uncontrollable” factors. ETFs provide visibility and mastery of the “controllable” factors and have therefore assumed significant importance recently.
Invest in the Kryptoin ETF public token sale on November 1, 2019, via Dutch Auction here at https://kryptoin.io/.
