Wall Street Insider Exposes The Private Equity Crisis (And The Next Massive AI Boom)

**Bilal** (0:00)
So let's talk about ETF as a totality, because obviously you're an ETF strategist. So for people, let's start at this level, right? For people that are just getting into the stock market, or people that's already been in the stock market, what, in your opinion, makes ETFs attractive, and why should people consider ETFs as opposed to just having all of that money invested in just individual stocks?

**SPEAKER_2** (0:27)
Okay, sorry about that.
So, my point of what I was saying is like, the ETF investment vehicle is just innovation to the entire space of investing. The most important thing for people to understand and know is they can get the same level of professional advice and exposure through the ETF wrapper that they used to get with mutual funds, and you get to build in more precision into what you want to hold in investments. So here's my example to the question that you guys were talking about before.
The concentration of the S&P 500 today, 40% is basically your Mag 7 of the S&P 500 You're talking there's 500 or so plus names in that. When you look at the Qs, the exact same thing. The concentration is north of 45, 50% in information technology. The market right now is priced in for perfection, meaning everyone knows what's gonna happen with the AI trade. Most companies have basically provided guidance on what they're doing and why they're doing it. But if I'm a general person and I'm concerned about what's going on in the market, and there's a slight miss on any of those top companies, that will have a material impact on the overall index, both the S&P 500 and the Qs.
So if I'm a general person just starting out and I say, you know what, I wanna buy these same companies that everyone's talking about, you can just buy the index. I don't need to trade the individual securities on a day-to-day basis. So that's why the ETF is so important. More importantly though, it's completely transparent. You know exactly what's inside of these investment vehicles. Right, that's critical for people to say, okay, I know exactly what I hold. Then I'll give you another opportunity to think about something else. Because it's so transparent, I can see what other companies that might be on the up and coming that I wanna trade in the future, that you may not be privy to, that even falls into a specific sector. So I just think the ETF rapper should be seen as innovation to the entire industry, and it creates space for the retail investor to participate, if that makes sense.

**Bilal** (2:36)
Hold on, let me just follow up on that, because you just said something that was insightful. Because when I used to be a financial advisor, we do a lot of mutual funds.
Are mutual funds essentially over?

**SPEAKER_2** (2:46)
What the hell is being like that?

**SPEAKER_3** (2:47)
I was talking about that. I was thinking the same thing. No one even talks about mutual funds anymore.

**Troy** (2:53)
I was trying to explain, I'm like, you know what, there's no point.

**SPEAKER_2** (2:54)
I mean, look, from an industry perspective, most asset managers, do you guys hear that?

**Troy** (3:01)
That was Ian's, but we are right now.

**SPEAKER_2** (3:03)
Most asset managers are not launching new mutual funds. Very seldom do you see a money manager say, I'm gonna launch a mutual fund. And it's because of the structure. So here, let me just break down a couple of things of the mutual fund that makes it a little more archaic.
So one, if I'm an investor of a mutual fund, and let's just say the mutual fund has $10 million in it, and a large investment or a trade comes in to sell a million dollars. So you're talking about a tenth of the overall assets need to be sold to liquidate. What happens is whatever positions that are held in that mutual fund, the gains or losses will need to be sold in the fund, and then those are passed off to the investors.
Well, why does that matter? Why is that important? Well, if I didn't sell my fund, I don't want to pay capital gains on an investment that I was hoping could be more tax efficient. So historically, the mutual fund provided exposure, institutional management, low fees, and all these benefits that we typically didn't have, but now the innovation of the ETF, because of the structure of it, it's more tax efficient. People don't need to participate in the buying and selling of other people in the fund. More importantly, fees have come down, and then to your point, transparency is another important aspect of it, Bilal, because mutual funds actually report like 30 days or 60 days or even a quarter behind to show what securities they hold.