What not to do with ETFs: Marc Jocum on the mistakes investors keep making

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Marc Jocum (0:45)

Don't invest in the label. Just because an ETF says something, it doesn't mean it's actually going to do that. My wife and I were cooking some lasagna the other day. There's so many different lasagna recipes, right? And everything is called lasagna, right? That is the name of it. But if you actually look at the ingredients in terms of what types of pasta you use, what sauce you use, it can be completely different. So the deliciousness factor might be actually quite different, even though the name says this is your basic lasagna recipe.

Owen Raszkiewicz (1:07)

But also I didn't know that not everyone makes lasagna with bechamel sauce, you know, that white sauce that goes in there. Like that's an example of like maybe an ETF is... A little bit of extra spice or something else.

Welcome to episode five of our Portfolio Construction Series. And we're going to tell you what not to do when it comes to building a portfolio and ETFs, generally speaking. I'm joined by Marc Jocum from Global X, the absolute master of ETFs. If I do say so myself, we're going to be talking about all the things that maybe you should be kind of second guessing. Some of those beliefs that you might have about investing, about portfolios, about ETFs. We're going to tackle all that and more in this episode.

Hey there, here's a quick note. This podcast contains general financial information only. That means it's not specific to you, your needs, goals or financial objectives. So don't act on the information until you've spoken to your financial planner. You'll find our full disclosure, disclaimer, and link to our financial services guide in the show notes. Marc, how are you doing?

Marc Jocum (2:04)

Very good, Owen. Good to be back.

Owen Raszkiewicz (2:05)

Good to be back indeed. Now, we are talking about, we're going to do the Charlie Munger inversion. Rather than tell everyone how to create this amazing portfolio, we're just going to say, just don't do this bit.

Marc Jocum (2:17)

Anti-behavior.

Owen Raszkiewicz (2:18)

Yeah, anti-behavior. So we're going to litter this episode with plenty of examples, plenty of tidbits that people think can go away, maybe research further through stuff that you've done potentially on your website and through your various speakings and same on our side. I've got two punchy questions at the start. The first one is, what is the first thing to look at when analyzing a growth-focused ETF?

Marc Jocum (2:43)

I would say don't focus on trailing 12-month returns because there could be a range of reasons why it could be there. As an example, our semiconductor ETF Semi, best-performing ETF on the Australian market, up 168%.

Awesome, great stuff. I could have done that.

Sometimes the top performers might be the bottom performers next time. And I'm not saying that semiconductors are going to be in the bottom. We've had a little bit of price correction. But when you're looking at a growth ETF, think about what's doing the underlying growth drivers, and it's normally earnings. How much are these companies actually making in money? So when you're thinking about capital growth, look under the hood and look, are these companies actually delivering meaningful earnings growth? And if you look at something like our semi-ETF, you're looking at high double digits, even triple digits earnings growth. So maybe that could be a good spot to actually have some money in there from a capital growth perspective. We've got ETFs like our Dragon ETF or our GXAI ETF, all playing this AI theme, seeing exceptional earnings growth. So earnings growth does a lot of the heavy lifting. Look under the hood. Don't focus on trailing returns. Focus on the earnings growth profile of these companies for a capital growth ETF.

Owen Raszkiewicz (3:46)

That's so good. Now, second question is, when you're looking at an income focused ETF, what is the first thing that you're looking at?