Episode 392: The Rise of ETF Slop

This is the Rational Reminder podcast, a weekly reality check on sensible investing and financial decision making from three Canadians. We're hosted by me, Benjamin Felix, chief investment officer, Dan Bortolotti, portfolio manager, and Ben Wilson, head of m and a and portfolio manager at PWL Capital. Happy New Year, everyone. Yes. Happy New Year. Good to be back. It's episode three ninety two. Three ninety two coming up on 400 here. Can't say that I ever thought we would get there when we started the podcast but here we are. It's what? Eight years? Around there. Yep. Been going for a while. A long journey. Every week. So we have a topic today that I've been thinking about for a while. Realized that it needed a name. I don't know if I'm the first person to call it this, I'm sure other people have written about it or something. But what I'm calling it is the rise of ETF slop. So we're gonna talk about that. I think it's actually a real problem for investors. Let's get into it. ETFs are no longer synonymous with sensible investing. Dan, when you started your blog, ETFs were, like, a big part of it is why anybody could go and build an index fund portfolio. And back then, most, but not all, ETFs were low cost index funds. You could kind of stick your hand into a bag of random ETFs, and you're gonna pull out probably something pretty good. But more recently, the fund management industry is launching literally hundreds of new actively managed ETFs every year. And in The US, this is an interesting little statistic. For the first time in US market history, there are more ETFs than there are individual stocks. So we've known for a while there were more indexes than individual stocks, which is always an interesting data point to pull out. There are now more ETFs than there are individual stocks in The US stock market, which I think is pretty crazy. Yeah. I think that's been the case for a little while in Canada, but of course we have so many fewer publicly traded companies to think of ETFs having eclipsed the number of individual stocks on The US exchanges is remarkable. The other data point that's interesting is, again speaking to The US market, there are now more actively managed ETFs than there are index tracking ETFs. So again, ETFs used to be synonymous almost with index funds. I think that's a mistake that a lot of people still make where people refer to ETFs as if that meant the same thing as index funds. And even if that were true on average, because there were more index ETFs than active ETFs, it is no longer the case. There are more actively managed ETFs than index tracking in The US. I think the big issue for investors is that a lot of the ETFs being launched today have really been engineered to attract …