THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION
DISCUSSED DURING HAWKTRADE MEETINGS. Past performance does not guarantee future results. Investment returns and principal value will fluctuate, so that
investors' shares, when sold, may be worth more or less than their original cost. Investing in any financial instruments does not guarantee that an investor will make
money, avoid losing capital, or indicate that the investment is risk-free. There are no absolute guarantees in investing. HAWKTRADE and its members do not bear any
responsibility for losses or gains made by members trading on their personal accounts based on analysis from HAWKTRADE meetings.
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HawkTrade will be having an event on
October 14th at 6:30pm in W10 PBB
 There will be a lot of food (Airliner’s and China
Star)
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Reminder: Applications due October 23rd.
Read instructions of Application for details
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What is an ETF:
 An Exchange Traded Fund that owns a basket of
stocks under one security
 Usually tracks and index and is passively managed
▪ For example, the SPDR Shares ETF, SPY, is an index that
tracks the S&P 500 (which is the largest 500 US
companies)
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Excellent way to buy into a sector or market
inexpensively
Easily craft a well-diversified portfolio
Easy to Manage on your own
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The largest difference between an ETF and a
Mutual Fund is that ETFs are traded like
securities.
 I can buy the SPY ETF like a stock, but I can only
purchase into a Mutual Fund at the end of the
market close (purchase NAV)
 ETFs NAV can differ from its market price
 ETFs have NO MINIMUM BUY-Ins
 ETFs have lower net expense ratios (generally)
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Less risky than holding individual stocks
 To really analyze a company takes A LOT of time (I
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am talking months here…)
99% of Americans do not have the time to do this
Always a chance you could be holding the next
Enron…
More Diversification
Easy to manage (sit back, relax, and let your
portfolio do the work!)
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A few Main components have a statistically
significant effect on your stock return when
purchasing ETFs
 Annual Turnover Expense (hidden killer of returns)
 Net expense ratio (be aware of gross expense
ratio)
 How the ETF is weighted (becoming a big-deal)
 Composition of ETF (i.e. Geography, Sectors, &
Market Cap)
 Track record
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Annual Turnover ratio: # of times a portfolio
churns (sells) stocks in its portfolio
 Ex. An ETF holds 10 stocks and sells 5 of those
stocks within the fiscal year for the ETF. Result:
Annual Turnover is 50%. What if all 10 stocks were
sold and then 10 more stocks were bought and
then sold within year. ATO = 200%
 Problem with high ATO: commission cost, bid-ask
spread cost, “hidden” cost of just holding the
stocks instead of selling
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Net expense ratio: the % cut that
management receives for “managing” the
portfolio
Ex. Net expense ratio = .1% (annual)
 Means if the index it tracks returns 11% for the
year, your return is 10.9% for the year
 Not a problem if Net Expense low, but what if it is
not? A 1% net expense ratio (for one etf) will kill
your portfolio return over the long-term
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Invest $10,000 in ETF with 1% Net expense
ratio. Market returns 10% per year
 Yr 1: You lose out on $100 (#’s may vary widely if
distributions re-invested)
 Yr 2: $219 (total loss of return from Yr 1-2, etc.)
 Yr 3: $359.71
 Yr 30: $41,817 !!! From Yr 1 to Yr 30
 Importance of buying low cost ETFs self-prevalent
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Majority of ETFs weighted according to
Market Capitalization of stocks
 Pros: easy to implement and potential for 0%
turnover. Essentially, how the market moves, is
how your ETF will move
 Cons: Your ETF will be weighted based on what
OTHER investors think of the market (Have other
investors been the best at pricing companies
correctly or at avoiding bubbles….)
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New Trend in ETF Weightings:
 Fundamental weightings (i.e. based on revenue,
dividend-yield, profit margins, market share, etc.)
▪ Pros: If you believe that markets are even semi-inefficient
and that fundamental analysis can buy better companies
then this is your pipe-dream-come-true
▪ Cons: Often comes with HUGE expense ratios that wipe out
almost any return you would have had above the markets
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Defeats purpose of index investing?
 Depends, but generally yes. Show example of RSP vs
SPY
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Geography, Sector, & and market
capitalization size matter
 US returns vs Developed Countries vs Emerging
markets (volatility and risk differences)
 Sectors: Utilities vs Health Care returns
 Capitalization: Large vs Small-cap
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Without a track record…
 Less proven results (high returns now may be
unsustainable in future)
 ETFs that fail to lure more Net Assets can (and
often are) pulled from the market (i.e. whatever
price that is last traded is the price you will be paid
if fund closes out!)
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Walkthrough of ETF & Stock Screener on
Fidelity
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A lot of Argument/Theory surrounds Portfolio
Composition:
 How much bonds vs stocks?
 REITs?
 Currencies, derivatives, options, etc.?
 Large vs Small Cap?
 Low-Volatility vs High Volatility?
 Dividends vs high-growth?
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60% Stocks
 30-60% US & 60-30% International with 10% EM
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30-40% Bonds (mixture of corp., muni, & gov)
10% REITs (US and International)
30s on up
60/40 split between stocks & bonds give or
take 10% for REITs
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20-early 30’s
 80-100% Stocks (general set up with US, INTL, and
EM okay)
 10-20% REITs
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Why No Bonds?
 Over every 30 year period over the last 200 years,
stocks have outperformed bonds and have a 99.6%
chance to continue to do so
 REITs (in this low interest rate environment) have
fairly high DivYields (usually 3-5%) & have pretty low
correlation w/equities. Good supplement to Bonds
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30s-40s
 60-70% stocks
▪ All depends on family, lifestyle, job occupation etc.
Consult FIN Advisor
 20-30% Bonds (more stable income)
 10% REITs
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50s-whenever you croak
 50-60% Stocks
 30-40% Bonds
 10% REITs
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Volatility of markets due to fed indecision
 Banks affected even more so
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Glencore credit downgrade
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TPP trade deal cuts
exclusivity period for
biotech drugs
Correction continues “Godfather of Biotech”
says IPO’s heating up
too much
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American Apparel files for bankruptcy
Pepsi affected by devaluation of the Bolivar
Miller-Busch merger updates
 Stocks down on the week
 10/14 final day to reach decision

Harley Davidson recalls
 Average of 94,000 a year since 2003!
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Google becomes Alphabet