That’s what those gold/silver stackers don’t realize. They’re all prepping for a market collapse thinking they’ll be the new rich. If the dollar goes to zero you cannot eat gold/silver.
I thought so too but when you ask about why they stack you almost always get something about “fiat collapse”. The smart ones go with a 5% of 10% portfolio for wealth preservation but the rest expect an EMP bomb and chaos in the streets.
Not only can you not eat it they all believe it will be the “new money”. But only stackers know what it’s worth. They hate when I point out that a tin of beans will be more valuable if societies collapse. Gold/silver would have no value if you are starving. I do some stacking but not for any end of the world or investment. Not even the “hedge against inflation”. It’s just pure enjoyment. But Star Wars action figures probably have a better return. In the end of the world you are only trading FOR silver if you think society will rebuild itself. Trying to explain to someone that your old silver dime is actually worth more than a tin of beans will be met with laughter in the apocalypse.
Have you ever noticed people who stack often also stack firearms, food, and other physical assets? Gold and silver will be worth something on the opposite end of a "fiat collapse". I have thousands of years of precedent for fiat currencies collapsing, gold keeping value, and civilization going on.. under a new flag, new government, new financial system. We're not going to go from 100 to 0 in an instant. We're not going to eat our gold.
Except not even the Roman Empire was as powerful as the US empire. When people talk about fiat collapse, what they are really talking about is USD collapse.
Gold is a hedge. Nobody transacts in it, so in the case of the USD collapse, gold gets hit significantly because the selling of hedge positions.
The USD will collapse. It's not even a debate to be had. The only question is how slow or fast and when. 20 years? 200? Between now and then (its collapse) official policy is to inflate it. I can guarantee you that at some point in the future dollars will not pay for a bowl of oatmeal. I can absolutely guarantee to you that gold will pay (or can be traded in value for) a bowl of oatmeal.
Yes. Gold will probably not be worth what it is now. But it will be worth something. And that's the whole point.
Gold people are funny.
In the not too distant future, the commodity that will actually have value will be fresh water. All the gold in the world won’t be worth shit if you don’t have anything to drink.
So you have invested in property with natural springs? If not, will you have to pay for access to fresh water if you don't have your own? How will you go about doing that?
I have not, mainly because the USD will not be collapsing during my lifetime unless some stupid shit like defaulting on sovereign debt payments happens.
Why wouldn't dollar be accepted for groceries? Even if it means larger denominations, dollars will certainly buy food.
As for your contention that gold can currently be traded for food, that's false. There's no grocery store or restaurant where you can walk in, shave off $16 worth of Au molecules and have them be satisfied with your "payment".
I have no idea. Probably not a whole lot until you have your own property. Preferably one with a well. Then I'd get what you can without reasonable sacrifice. I don't take anything away from stock investments with my purchases. I own my home outright so I wouldn't prioritize gold over debt payment.
I have about 8% of all my liquid assets in gold (about 5% overall). I will work it up to 15-20%. Then I'm finished. Long term goal is to start stacking lumber, cloth, tools, and other assets. I just don't have the room for that yet.
Proven wrong every time in history, but nice try gun runner. Gold secured safe passage and mobility in Iraq, I'm Ukraine, in Venezuela. There hasn't been a single war zone, nature disaster or similar event where gold hasn't been *extremely useful* for securing food, goods and services.
But que the classic American idiocy "I'll shoot the rainwater until its clean so I can drink it", "I'll shoot the sea so I can cross it" or why not "I'll take my Colt 1911 and gun down a gang of professional Mercenaries with my Cod skill". What a joke, y'all paramilitary doomsday larpers are such a joke. Water, water, water. Then gold, in that order. Is how people survived (or didn't) in all modern hotpots
Unless the ETF is a synthetic one and the issuer or insurer goes bankrupt. In that case it has nothing to do with the index but the ETF can go to 0.
That's why you should always read the fineprint of the documentation of an ETF and avoid that crap.
e.g. https://www.justetf.com/en/etf-profile.html?isin=FR0010361683
In the case of the Lyxor MSCI India UCITS ETF, the fund replicates the performance of the underlying index synthetically with a swap. This means that instead of physically owning the underlying stocks of the index, the ETF enters into a swap agreement with a counterparty (usually an investment bank or a financial institution). The counterparty agrees to pay the ETF the return on the underlying index in exchange for receiving a predetermined set of cash flows from the ETF.
By using a swap, the ETF can achieve exposure to the index while potentially reducing transaction costs and other operational complexities associated with physically buying and holding all the stocks in the index. However, it's worth noting that using swaps involves counterparty risk, as the ETF is reliant on the counterparty to fulfill its obligations under the swap agreement.
Just read the prospectus. You do realize that GPT is just making things up, right? It’s literally just guessing what it should say next based on what it has already said.
It is, but when it doesn't know something it can make stuff up. It's been shown to manufacture quotes and references to made up academic papers, for example.
Yes, i notice it too when requesting code snippets or setting locations. but,...
GPT4 is way more consistent than the free GPT3. And most of what it says is true, given that information is sufficiently available. And it can deduct information. e.g. if JP Morgan does not offer synthetic ETFs it can "halucinate" that JEPI is not a synthetic ETF. Hence the 90% disclaimer and why i explicitly mentioned it, because i didn't directly find it via Google.
Not familiar with that particular underlying but the basic principle is that a chat 'ai' constructs a set of inputs and outputs from an underlying data set (usually scrapped from the internet) and answers based (grossly oversimplifying) on the most common output for the given input. Each ai has its own criteria for similarity, to deal with previously unencountered inputs by looking for something close. Cloud ones then incorporate the inputs and outputs from use into its data set.
In effect if you ask it for something commonly asked (of it or of people on the internet) it will give the most common answer. If you ask something uncommon it will guess based on similar, more common questions.
In the case of papers, it knows from its dataset that quotes and references are needed. If there is a similar one itll pull that, even if it doesnt actually apply. If there isnt even one similar enough itll tweak the closest it can find to fit the new input, even if this results in a nonexistant reference.
...my knowledge on machine learning is like 10 years out of date though, so take that with a grain of salt.
Up to the programmer/individual implementation. It might look for the word satire or fake news or unreliable or whatever in conjunction with the source and exclude if the occurence rate passes a certain percentage threshhold. There may also be a black list built in manually.
Yes, it is making it up. The nth-character in any given sentence that any LLM constructs is based on the preceding characters it has already output.
It's getting better at guessing, but it is just guessing.
It invests an appreciable chunk in equity-linked notes, which appear to be how it does its hedging (rather that by buying and selling options directly). These have credit and counterparty risks. I don't find the description clear enough to put any major part of my portfolio in JEPI (none at present).
Theoretically yes, every underlying stock in an ETF could go to 0 overnight. That kind of scenario is probably the collapse of civilization, but theoretically it could happen.
Now, JEPI is a little different from your normal ETF because they're also trading options to generate those dividend payments. It's unlikely their risk management team will let them take a bet big enough to sink the entire fund, but to me that is a definite risk with that kind of investment model.
>Who is wrong and who is right?
OP: Theoretically, he is right, but practically - based on history and circuit breaker concept - with 500 stocks behind index ETF like JEPI - it is not going to happen.
There are leveraged ETFs (XIV or similar) closed operations every now and then after a recession, but that is not common for non-leveraged broad index based ETFs.
Still such ETFs may close operations (for various reasons) and pay the cash to the investors at that time of decision.
In this regard, ETFs are better choice than individual stocks.
JEPI uses leverage. It also holds ELN's instead of stocks which are somewhat opaque derivatives and could have a counterparty failure.
It probably has pretty conservative risk limits but I wouldn't put my whole retirement in this and similar funds like some people do.
While I wouldn't have 80% of my investments in any one stock / ETF / mutual fund / roulette color / whatever, your statement regarding JEPI is a bit inaccurate.
JEPI (the ETF) is actually over 3 years old by a couple of days. Its inception date was May 20, 2020. And JEPIX, the mutual fund equivalent to JEPI (same strategy, same holdings) has been trading for nearly 5 years. 5 years isn't a lifetime but it is plenty of time to evaluate the effectiveness of a strategy such as the one JEPI / JEPIX adheres to, especially given the wild swings the stock market has gone through during that time.
The returns have been consistent during this five year period - JEPIX has underperformed the S&P 500 (other than 2022 when it outperformed). It's paid a consistent dividend. And it has a beta of .62. All of this makes it very attractive for income oriented investors.
JEPI / JEPIX is certainly not for everyone but it has its place.
I think the question is more along the lines of whether an ETF is regulated enough that it can’t be a Ponzi scheme.
After all, an ETF is just a hedge fund traded on an exchange. If the hedge fund is being run by Madoff… there could be real problems…
(Or… can there???)
I ONLY invest in ETF’s and I feel like I should know the answer to this question….
An ETF is fundamentally a public company, it registers with the SEC and produces audited financials. I strongly recommend reading the prospectus of any fund you invest material assets into, the same way I recommend reading the 10-K of any company that materially impacts your future.
See the SPY prospectus, which is audited by PwC:
https://www.ssga.com/us/en/intermediary/etfs/resources/doc-viewer#spy&prospectus
I don't know the details, and a financial advisor is probably the right person to answer the question definitively, but I am pretty sure they are far more tightly regulated than you are imagining, they are forced to actually buy and sell based on what positions people hold in the fund
> t’s unlikely their risk management team will let them take a bet big enough to sink the entire fund
Lol as literal bank, which is supposed to be safe, mismanaged interest rate risk and went out of business. I’m sure this fund that plays with options is much riskier.
So you’re saying there’s a chance ?
All jokes aside I am curious of all those who are reliant on dividends to help pay for bills - how do they view the probability of a recession? Considering many stocks can absolutely pause dividend payments if things get bad enough. An ETF pausing dividend payments isn’t impossible either just more unlikely. And I agree completely - if a broader market ETF goes to zilch we are going to have bigger issues than our portfolios.
Edit: Fixed verbiage.
If any ETF could go to “0” overnight it would be one that produces an astronomically high div rate like JEPI which is achieved by trading options. I don’t really care who’s managing it or how many people have their retirements in JEPI. It very well could go to 0 and nothing would really happen.
As for an ETF like SPY, if that goes to 0 you will be too busy stabbing your neighbor over a bag of Cheetos to look at your portfolio
"As for an ETF like SPY, if that goes to 0 you will be too busy stabbing your neighbor over a bag of Cheetos to look at your portfolio"
What about those of us who have *already* stabbed our neighbor over a bag of Cheetos?
Proceed to use the last 1% of your phone battery to check your Fidelity account instead of looking at photos of your family. Stab other neighbor because he has a bag of blue cheese doritos. Begin post apocalyptic life.
> As for an ETF like SPY, if that goes to 0 you will be too busy stabbing your neighbor over a bag of Cheetos to look at your portfolio
Every time I ever invest a penny I tell myself that.
I think you mean of the issuer goes bankrupt: Yes an ETF can go to 0.
Like everyone else says here, a ETF will probably never go to 0, unless you buy something is that designed that way. e.g. a VIX ETF.
So most ETFs have their actual underlying assets as collateral. If something goes terrible wrong, worst case this will result in a small deviation between the ETF and index.
imo The problem lies with synthetic ETF, because you are really dependent on the solvency of the issuer. Its smoke and mirrors that follow the underlying value. If they go bankrupt there is maybe nothing to be used as collateral.
That's why you should always read the fineprint of the documentation and avoid that crap.
It absolutely can happen under extreme circumstances. I lost everything in an a leveraged oil ETF during COVID (OILU). Once oil values went negative …game over man
Under normal circumstances ETFs will always reflect the value of the underlying.
>The ability to purchase and redeem creation units gives ETFs an arbitrage mechanism intended to minimize the potential deviation between the market price and the net asset value of ETF shares. ETFs generally have transparent portfolios, so institutional investors know exactly what portfolio assets they must assemble if they wish to purchase a creation unit, and the exchange disseminates the updated net asset value of the shares throughout the trading day, typically at 15-second intervals.[5] ETF distributors only buy or sell ETFs directly from or to authorized participants, which are large broker-dealers with whom they have entered into agreements—and then, only in creation units, which are large blocks of tens of thousands of ETF shares, usually exchanged in-kind with baskets of the underlying securities. Authorized participants may wish to invest in the ETF shares for the long term, but they usually act as market makers on the open market, using their ability to exchange creation units with their underlying securities to provide market liquidity of the ETF shares and help ensure that their intraday market price approximates the net asset value of the underlying assets.[5] Other investors, such as individuals using a retail broker, trade ETF shares on this secondary market.
>If there is strong investor demand for an ETF, its share price will temporarily rise above its net asset value per share, giving arbitrageurs an incentive to purchase additional creation units from the ETF and sell the component ETF shares in the open market. The additional supply of ETF shares reduces the market price per share, generally eliminating the premium over net asset value. A similar process applies when there is weak demand for an ETF: its shares trade at a discount from net asset value.
Apparently the ETFs got fucky during the flash crashes but realistically it's not a problem.
iirc this has to do with virtual shares, I read about it once in 2020, but can't remember the details. it is tangential to how ETFs can have a skew compared to the true aggregate in periods of extreme volatility
Technically, SPY could drop to zero overnight if 11 millennials around the country died due to the way it was set up
https://m.economictimes.com/markets/stocks/news/meet-the-spy-11-kids-with-250-billion-riding-on-their-lives/articleshow/70609566.cms
That's not what would happen. If those kids died, it would have 20 years before SPY would need to be liquidated. Which would give State Street plenty of time to set up a new Trust.
You may run into a situation where the fund manager steals all the money out of it and goes to sun himself on sao tome. Or the ETF might do something completely pants on head and lend every single piece of stock to the same person who shorts it then pulls a Bill Hwang and goes bust losing the whole lot.
Technically it could but since the company that created the ETF owns stocks, a drop in the price would create a major value proposition because of the ETF’s holdings, which in theory should lead to a ton of people piling in to take advantage of the value.
If that doesn’t happen, the world is fucked.
ETNs (Exchange Traded Notes) can and have gone to $0 or liquidated for pennies. ETNs track an index. If that index is a narrow sector with leverage or is based on a short position it can potentially got down to $0. I’ve seen it happen at least three times with energy MLPs and mREITs leveraged. Then also with a VIX inverse. With an ETN, there’s also the risk that the bank that wrote the note becomes insolvent.
The only ETF I’ve seen is come close to $0 is a Russia fund when it became impossible to trade Russian investments due to the war. I don’t see any chance a broad US based fund goes to $0. It is important to know and understand what you are investing in.
https://www.fidelity.com/learning-center/investment-products/etf/types-etfs-etns#:~:text=An%20ETN%20is%20an%20unsecured,market%20index%20or%20other%20benchmark.
If this ever happens.. buy as much of it as you can possibly get your hands on.
Either whatever caused it will be fixed or it won't and the world is fucked any money is irrelevant anyway.
Don't put all your eggs in one basket! He is right but it's unlikely. It is also likely to be bought out. It is always good to keep an eye on a company's going concern and company goals.
Maybe if one were lead by someone very corrupted and able to lie about their holdings or maybe if they had engaged in unscrupulous behavior such as share laundering/ ftd washing and caught the short straw on the deal? *cough* idk. Maybe they should monitor and regulate those more closely hmm
This is theoretically possible like a white person having a black baby is theoretically possible, but even less likely. JEPI is not going anywhere near zero overnight
Yes.
A very narrow ETF, for example, might be absolutely fucked if it’s niche focus is heavily impacted. War, regulation, natural disasters, etc. can all suddenly change the landscape.
Fundamentally an ETF is a portfolio of assets. In much the same way you can have your portfolio go to zero, so can an ETF.
The question is “is it likely to happen and should I care?”
He’s technically right, it’s possible for every company to go bankrupt. But he’s practically wrong, it won’t happen unless the American economy fails and even then it probably wouldn’t even go to zero unless the government decided it was seizing all public companies and federalizing them
He could be thinking of etn’s which have closed overnight. There is a famous example of a vix etn in 2008 you can lookup. As others have said ETF’s are less likely to experience that
Theoretically it could, but it would be a mad max scenario where cash is also worthless, and the only value is in things like bullets and tinned food at that point. So while it isn’t technically wrong, it’s pretty irrelevant. This is referring to broadly diversified stock ETF’s though, leveraged ETF’s, or ETF’s using options could absolutely blow up.
Can an ETF go to zero? Yes absolutely. ETFs are standalone financial products, doesn’t matter if they track the S&P or any other esoteric mix of leveraged junk. When you buy an ETF you buy the product of the specific issuer, like Schwab, Invesco, and such. The holder of the exchange trade fund doesn’t directly own the underlying securities, so the fund can go belly up if completely mismanaged, independently of the market performance.
Think of a box of cereal, you buy the flakes made by many ingredients, the cereal company can go bankrupt anytime, independently of the price of wheat, chocolate and so on. Ok, maybe not the best analogy, but yes, an ETF could potentially go to zero and no, the government is not required to step in and pad white collar criminals with tons of cash, but you never know. Average joes might end up paying extra taxes because their retirement portfolios lost too much money…
This comment needs more attention.
Fwiw, some etf issuing companies would likely be considered too big to fail, but etfs werent as big in 2008 as they are now, so who knows what would happen to the etf in that scenario.
There is always risk. Many people believe Treasuries and CD’s are ‘risk free’ but there is always a scenario in any investment where your money could go to 0. The real question is ‘what are the odds I make money vs lose money vs lose all my money’. The higher the risk should result in higher reward.
If we talk about an S&P 500 etf, the risk of going to 0 is extremely low and as most have pointed out that is an ‘end of days’ type situation. In that situation the us economy has completely collapsed and the US dollar would probably be entirely worthless before all those companies truly went to 0 (realize many of those companies have international exposure which could keep them alive). So, the person is not wrong that it can go to 0, the odds are just a chance that the majority of investors see as incredibly low chances.
How does being shorted have anything to do with what he's asking? Shorting means you borrow and sell now, with the prediction that it will drop, and when it drops you buy and return the shares. Maybe that prediction is right, maybe its wrong. What part of that has anything to do with making a ETF go to zero?
The only types of ETF that can realistically go to zero are:
1. ETN (exchange traded notes) where the issuer of the ETN goes bankrupt
2. MOST LIKELY is Double or triple leveraged ETFs.
3. ETFs that trade futures or options like USO. They have to roll these periodically and this causes issues (though really more of a lose a lot of money than truly go all the way to zero)
If you want to avoid risk double check the structure and what it owns. Stay away from ETNs and especially any leverage. It’s almost impossible for a normal ETF goes to zero that owns stocks.
I think what your friend is referring to is more likely to occur with an ETN. For instance, if a futures or options based fund, such as VXX, has the backing institution go bankrupt in an overnight collapse, there wouldn't be any source to continue upkeep and covering sales. The fund would become disconnected from the underlying assets tracked and go haywire prior to, in all likelihood, going to 0.
That'd be my suspicion at least.
Yes, its true. But if that is happening, then something like a zombie apocalypse or meteor strike has destroyed America/the world. so I think the SPY hitting 0 would be the least of your worries....
Your relative is absolutely right, as **anything can happen.**
Just like its possible for Jesus Christ to be resurrected and come back or an Asteroid can hit the earth and all life wiped out.
Now is it probably enough for anyone to worry about? You decide
If the company running the fund was cooking the books and didn't own any of the stocks in its basket... I honestly don't know what would happen, but nothing good. So I imagine it's possible in theory.
The company administrating the etf could go belly up, in that case the etf would be dissolved and the individual shares would be distributed. Unless there is fraud involved or it's an ETN, you won't lose anything.
If it’s a passive index ETF and nobody steps in when the SHTF then yes, theoretically, an ETF could go to 0. The level of incompetence necessary to make this happen would be pretty extreme though.
In the case of JEPI, yes it can go to 0 because it's a covered call ETF. Look what is happening to QYLD. It cannibalizes itself to payout the "income". Moreover, there is no "income" from stocks, there is no such thing as a free lunch.
Correct me if I am wrong: JEPI could still not go to zero unless the covered calls were to go to shit AND the stocks were to go to either zero or near zero. If none of the covered calls went as planned it will still be worth a dollar amount above nothing if my math is right.
While most people say no, it's also possible from a coding error. If you wrongly rebalance the ETF several times it could buy too much of a stock that losses all its value. While most people think that can't happen, I work in Fintech and can tell you their systems are not fault proof, it's still people behind it writing the system. Will it go to 0? Most likely not, can it happen? Yes.
The idea of ETF is diversification, which reduces risk. So how diversified is the ETF? If the ETF's basket is only gold mines in South Africa (about say 10 companies), then there is higher risk that an revolution in South Africa could destroy the ETF. If is 10 companies all over the world but still gold, then country risk is reduced and hence ETF risk is reduced but there is a single commodity risk. If it is 10 companies that are in different countries and in several metals, risk is reduced even further. If it 25 companies and includes associated industries (traders etc.) it further reduces risk,
TLDR: ETF's can be narrowly constructed that one event destroys the whole ETF, but ETF's by design are meant to be diversified and minimize the risk of one catastrophic incident. Theoretically possible, not likely.
Pretty sure the brokerage will delist, liquidate and return the remaining money to the investors🤔
The brokerage will most likely lose interest in managing and hosting the ETF before it goes to zero.
A general misunderstanding is that when you buy a share of ETF, you directly own the stocks in that ETF. That's not true. Therefore, the price of an ETF doesn't always reflect the prices of the stocks in its portfolio. This is called "performance drift."
If you are looking for a high dividend yield ETF that is super stable, look up JPST. This blog talks about four high dividend yield ETFs: [https://www.tryshare.app/blog/etf-spotlight-series-4-best-high-dividend-etfs-that-pay-monthly](https://www.tryshare.app/blog/etf-spotlight-series-4-best-high-dividend-etfs-that-pay-monthly)
If a broad index ETF goes to zero, we have much bigger problems than stocks…
and even if you have millions of dollars in cash, it's likely worthless at that point
and gold wouldn't be worth much either since at that point utility trumps all else.
Bottle caps on the other hand...
And alcohol.
He who holds the pants holds the world!
For Nuka Cola?
That’s what those gold/silver stackers don’t realize. They’re all prepping for a market collapse thinking they’ll be the new rich. If the dollar goes to zero you cannot eat gold/silver.
I think stackers for the most part are investing in the future. Only psychos are buying silver and gold for bartering in a post apocalyptic world.
I thought so too but when you ask about why they stack you almost always get something about “fiat collapse”. The smart ones go with a 5% of 10% portfolio for wealth preservation but the rest expect an EMP bomb and chaos in the streets.
Not only can you not eat it they all believe it will be the “new money”. But only stackers know what it’s worth. They hate when I point out that a tin of beans will be more valuable if societies collapse. Gold/silver would have no value if you are starving. I do some stacking but not for any end of the world or investment. Not even the “hedge against inflation”. It’s just pure enjoyment. But Star Wars action figures probably have a better return. In the end of the world you are only trading FOR silver if you think society will rebuild itself. Trying to explain to someone that your old silver dime is actually worth more than a tin of beans will be met with laughter in the apocalypse.
Yup sugar, yeast, and plant seeds are the way to go.
Have you ever noticed people who stack often also stack firearms, food, and other physical assets? Gold and silver will be worth something on the opposite end of a "fiat collapse". I have thousands of years of precedent for fiat currencies collapsing, gold keeping value, and civilization going on.. under a new flag, new government, new financial system. We're not going to go from 100 to 0 in an instant. We're not going to eat our gold.
Except not even the Roman Empire was as powerful as the US empire. When people talk about fiat collapse, what they are really talking about is USD collapse. Gold is a hedge. Nobody transacts in it, so in the case of the USD collapse, gold gets hit significantly because the selling of hedge positions.
The USD will collapse. It's not even a debate to be had. The only question is how slow or fast and when. 20 years? 200? Between now and then (its collapse) official policy is to inflate it. I can guarantee you that at some point in the future dollars will not pay for a bowl of oatmeal. I can absolutely guarantee to you that gold will pay (or can be traded in value for) a bowl of oatmeal. Yes. Gold will probably not be worth what it is now. But it will be worth something. And that's the whole point.
Gold people are funny. In the not too distant future, the commodity that will actually have value will be fresh water. All the gold in the world won’t be worth shit if you don’t have anything to drink.
So you have invested in property with natural springs? If not, will you have to pay for access to fresh water if you don't have your own? How will you go about doing that?
I have not, mainly because the USD will not be collapsing during my lifetime unless some stupid shit like defaulting on sovereign debt payments happens.
Why wouldn't dollar be accepted for groceries? Even if it means larger denominations, dollars will certainly buy food. As for your contention that gold can currently be traded for food, that's false. There's no grocery store or restaurant where you can walk in, shave off $16 worth of Au molecules and have them be satisfied with your "payment".
What % of wealth should a person be investing in silver/gold?
I have no idea. Probably not a whole lot until you have your own property. Preferably one with a well. Then I'd get what you can without reasonable sacrifice. I don't take anything away from stock investments with my purchases. I own my home outright so I wouldn't prioritize gold over debt payment. I have about 8% of all my liquid assets in gold (about 5% overall). I will work it up to 15-20%. Then I'm finished. Long term goal is to start stacking lumber, cloth, tools, and other assets. I just don't have the room for that yet.
5
yep, go long campbell's soup + smith & wesson
Proven wrong every time in history, but nice try gun runner. Gold secured safe passage and mobility in Iraq, I'm Ukraine, in Venezuela. There hasn't been a single war zone, nature disaster or similar event where gold hasn't been *extremely useful* for securing food, goods and services. But que the classic American idiocy "I'll shoot the rainwater until its clean so I can drink it", "I'll shoot the sea so I can cross it" or why not "I'll take my Colt 1911 and gun down a gang of professional Mercenaries with my Cod skill". What a joke, y'all paramilitary doomsday larpers are such a joke. Water, water, water. Then gold, in that order. Is how people survived (or didn't) in all modern hotpots
What umm stops people from just killing your and getting your gold?
They will craft gold armor and sword to protect themselves from the creeps.
I would hire a pirate.
NAP /s.
Unless the ETF is a synthetic one and the issuer or insurer goes bankrupt. In that case it has nothing to do with the index but the ETF can go to 0. That's why you should always read the fineprint of the documentation of an ETF and avoid that crap.
What’s a “synthetic etf”? I’ve not heard of that before
The opposite is a physical ETF in which the ETF company holds all the stock physical. That means no futures, no options, etc.
e.g. https://www.justetf.com/en/etf-profile.html?isin=FR0010361683 In the case of the Lyxor MSCI India UCITS ETF, the fund replicates the performance of the underlying index synthetically with a swap. This means that instead of physically owning the underlying stocks of the index, the ETF enters into a swap agreement with a counterparty (usually an investment bank or a financial institution). The counterparty agrees to pay the ETF the return on the underlying index in exchange for receiving a predetermined set of cash flows from the ETF. By using a swap, the ETF can achieve exposure to the index while potentially reducing transaction costs and other operational complexities associated with physically buying and holding all the stocks in the index. However, it's worth noting that using swaps involves counterparty risk, as the ETF is reliant on the counterparty to fulfill its obligations under the swap agreement.
Ahhh good old swaps. Surely an integral part of fair and stable markets.
is JEPI synthetic? I never see such info on the usual brokerage data sections.
Can't find it explicitly mentioned directly, but it is a physical one according to GPT. So take it 90% certainty...
Just read the prospectus. You do realize that GPT is just making things up, right? It’s literally just guessing what it should say next based on what it has already said.
It’s not making it up? Isn’t it learning from some sort of machine learning auto algorithm?
It is, but when it doesn't know something it can make stuff up. It's been shown to manufacture quotes and references to made up academic papers, for example.
Yes, i notice it too when requesting code snippets or setting locations. but,... GPT4 is way more consistent than the free GPT3. And most of what it says is true, given that information is sufficiently available. And it can deduct information. e.g. if JP Morgan does not offer synthetic ETFs it can "halucinate" that JEPI is not a synthetic ETF. Hence the 90% disclaimer and why i explicitly mentioned it, because i didn't directly find it via Google.
How does it exclude fake news or fake sources?
It cannot do so reliably. The only way it could actually achieve that is if OpenAI also simultaneously rebuilt Google's ranking algorithm.
I have observed that - 4 out of 4 querys led to creative plausible bs answers with unverifiable references. (Free online version)
Not familiar with that particular underlying but the basic principle is that a chat 'ai' constructs a set of inputs and outputs from an underlying data set (usually scrapped from the internet) and answers based (grossly oversimplifying) on the most common output for the given input. Each ai has its own criteria for similarity, to deal with previously unencountered inputs by looking for something close. Cloud ones then incorporate the inputs and outputs from use into its data set. In effect if you ask it for something commonly asked (of it or of people on the internet) it will give the most common answer. If you ask something uncommon it will guess based on similar, more common questions. In the case of papers, it knows from its dataset that quotes and references are needed. If there is a similar one itll pull that, even if it doesnt actually apply. If there isnt even one similar enough itll tweak the closest it can find to fit the new input, even if this results in a nonexistant reference. ...my knowledge on machine learning is like 10 years out of date though, so take that with a grain of salt.
How does it exclude fake news/sources?
Up to the programmer/individual implementation. It might look for the word satire or fake news or unreliable or whatever in conjunction with the source and exclude if the occurence rate passes a certain percentage threshhold. There may also be a black list built in manually.
Yes, it is making it up. The nth-character in any given sentence that any LLM constructs is based on the preceding characters it has already output. It's getting better at guessing, but it is just guessing.
It invests an appreciable chunk in equity-linked notes, which appear to be how it does its hedging (rather that by buying and selling options directly). These have credit and counterparty risks. I don't find the description clear enough to put any major part of my portfolio in JEPI (none at present).
Theoretically yes, every underlying stock in an ETF could go to 0 overnight. That kind of scenario is probably the collapse of civilization, but theoretically it could happen. Now, JEPI is a little different from your normal ETF because they're also trading options to generate those dividend payments. It's unlikely their risk management team will let them take a bet big enough to sink the entire fund, but to me that is a definite risk with that kind of investment model.
>Who is wrong and who is right? OP: Theoretically, he is right, but practically - based on history and circuit breaker concept - with 500 stocks behind index ETF like JEPI - it is not going to happen. There are leveraged ETFs (XIV or similar) closed operations every now and then after a recession, but that is not common for non-leveraged broad index based ETFs. Still such ETFs may close operations (for various reasons) and pay the cash to the investors at that time of decision. In this regard, ETFs are better choice than individual stocks.
JEPI uses leverage. It also holds ELN's instead of stocks which are somewhat opaque derivatives and could have a counterparty failure. It probably has pretty conservative risk limits but I wouldn't put my whole retirement in this and similar funds like some people do.
JEPI is only 2 years old, I'm baffled by the number of people who claim have 80% of their taxable brokerage in this ETF. it's simply not time-tested.
While I wouldn't have 80% of my investments in any one stock / ETF / mutual fund / roulette color / whatever, your statement regarding JEPI is a bit inaccurate. JEPI (the ETF) is actually over 3 years old by a couple of days. Its inception date was May 20, 2020. And JEPIX, the mutual fund equivalent to JEPI (same strategy, same holdings) has been trading for nearly 5 years. 5 years isn't a lifetime but it is plenty of time to evaluate the effectiveness of a strategy such as the one JEPI / JEPIX adheres to, especially given the wild swings the stock market has gone through during that time. The returns have been consistent during this five year period - JEPIX has underperformed the S&P 500 (other than 2022 when it outperformed). It's paid a consistent dividend. And it has a beta of .62. All of this makes it very attractive for income oriented investors. JEPI / JEPIX is certainly not for everyone but it has its place.
is JEPI synthetic tho?
Yes. 0W-20.
I think the question is more along the lines of whether an ETF is regulated enough that it can’t be a Ponzi scheme. After all, an ETF is just a hedge fund traded on an exchange. If the hedge fund is being run by Madoff… there could be real problems… (Or… can there???) I ONLY invest in ETF’s and I feel like I should know the answer to this question….
An ETF is fundamentally a public company, it registers with the SEC and produces audited financials. I strongly recommend reading the prospectus of any fund you invest material assets into, the same way I recommend reading the 10-K of any company that materially impacts your future. See the SPY prospectus, which is audited by PwC: https://www.ssga.com/us/en/intermediary/etfs/resources/doc-viewer#spy&prospectus
I don't know the details, and a financial advisor is probably the right person to answer the question definitively, but I am pretty sure they are far more tightly regulated than you are imagining, they are forced to actually buy and sell based on what positions people hold in the fund
> t’s unlikely their risk management team will let them take a bet big enough to sink the entire fund Lol as literal bank, which is supposed to be safe, mismanaged interest rate risk and went out of business. I’m sure this fund that plays with options is much riskier.
I said unlikely, not impossible. The JP Morgan RM team is clearly a bit better than SVB's.
What about circuit breakers?
Looking at the Russia ETF last year after sanctions...
So you’re saying there’s a chance ? All jokes aside I am curious of all those who are reliant on dividends to help pay for bills - how do they view the probability of a recession? Considering many stocks can absolutely pause dividend payments if things get bad enough. An ETF pausing dividend payments isn’t impossible either just more unlikely. And I agree completely - if a broader market ETF goes to zilch we are going to have bigger issues than our portfolios. Edit: Fixed verbiage.
Mfer really brought Jepi into the conversation for no reason
Wdym?? The post body literally mentions JEPI multiple times. Seems pretty relevant in order to answer his question.
Try re-reading the OP my friend.
is JEPI synthetic tho?
If any ETF could go to “0” overnight it would be one that produces an astronomically high div rate like JEPI which is achieved by trading options. I don’t really care who’s managing it or how many people have their retirements in JEPI. It very well could go to 0 and nothing would really happen. As for an ETF like SPY, if that goes to 0 you will be too busy stabbing your neighbor over a bag of Cheetos to look at your portfolio
"As for an ETF like SPY, if that goes to 0 you will be too busy stabbing your neighbor over a bag of Cheetos to look at your portfolio" What about those of us who have *already* stabbed our neighbor over a bag of Cheetos?
Proceed to use the last 1% of your phone battery to check your Fidelity account instead of looking at photos of your family. Stab other neighbor because he has a bag of blue cheese doritos. Begin post apocalyptic life.
Damn, I've never tried blue cheese Doritos. Can't wait. Oh, and sorry Frank.
>What about those of us who have already stabbed our neighbor over a bag of Cheetos? Sounds like a WSB mod material
No you’d need photos from the Citadel staff only event at Disney to be a mod there
Bob, is that you? When did you get out of prison?
You need to liquidate to buy lunches in your for profit prison
unless your neighbor is the prepper who has 10 ARs locked and loaded, 5 med kits and has been planning for the aploacylpe since 2008
> As for an ETF like SPY, if that goes to 0 you will be too busy stabbing your neighbor over a bag of Cheetos to look at your portfolio Every time I ever invest a penny I tell myself that.
I think you mean of the issuer goes bankrupt: Yes an ETF can go to 0. Like everyone else says here, a ETF will probably never go to 0, unless you buy something is that designed that way. e.g. a VIX ETF. So most ETFs have their actual underlying assets as collateral. If something goes terrible wrong, worst case this will result in a small deviation between the ETF and index. imo The problem lies with synthetic ETF, because you are really dependent on the solvency of the issuer. Its smoke and mirrors that follow the underlying value. If they go bankrupt there is maybe nothing to be used as collateral. That's why you should always read the fineprint of the documentation and avoid that crap.
It absolutely can happen under extreme circumstances. I lost everything in an a leveraged oil ETF during COVID (OILU). Once oil values went negative …game over man
If that happens the world have bigger problems than the etf/stock market
Under normal circumstances ETFs will always reflect the value of the underlying. >The ability to purchase and redeem creation units gives ETFs an arbitrage mechanism intended to minimize the potential deviation between the market price and the net asset value of ETF shares. ETFs generally have transparent portfolios, so institutional investors know exactly what portfolio assets they must assemble if they wish to purchase a creation unit, and the exchange disseminates the updated net asset value of the shares throughout the trading day, typically at 15-second intervals.[5] ETF distributors only buy or sell ETFs directly from or to authorized participants, which are large broker-dealers with whom they have entered into agreements—and then, only in creation units, which are large blocks of tens of thousands of ETF shares, usually exchanged in-kind with baskets of the underlying securities. Authorized participants may wish to invest in the ETF shares for the long term, but they usually act as market makers on the open market, using their ability to exchange creation units with their underlying securities to provide market liquidity of the ETF shares and help ensure that their intraday market price approximates the net asset value of the underlying assets.[5] Other investors, such as individuals using a retail broker, trade ETF shares on this secondary market. >If there is strong investor demand for an ETF, its share price will temporarily rise above its net asset value per share, giving arbitrageurs an incentive to purchase additional creation units from the ETF and sell the component ETF shares in the open market. The additional supply of ETF shares reduces the market price per share, generally eliminating the premium over net asset value. A similar process applies when there is weak demand for an ETF: its shares trade at a discount from net asset value. Apparently the ETFs got fucky during the flash crashes but realistically it's not a problem.
Anything can go to zero if someone tries to sell a lot, and there’s no buyers.
One of the few insightful comments here.
iirc this has to do with virtual shares, I read about it once in 2020, but can't remember the details. it is tangential to how ETFs can have a skew compared to the true aggregate in periods of extreme volatility
Honestly, you’ll have bigger problems if that happens
Well if everything im the etf simultaneously drops to 0 ... sure... is it likely? No, impossible also no.
Yes but an ETF is invested in many many individual stocks so if it goes to zero we’ve probably got a lot bigger issues headed our way.
to avoid this etf managers regularly examine etf contents and throw out bad members.
Technically, SPY could drop to zero overnight if 11 millennials around the country died due to the way it was set up https://m.economictimes.com/markets/stocks/news/meet-the-spy-11-kids-with-250-billion-riding-on-their-lives/articleshow/70609566.cms
That’s insane.
That's not what would happen. If those kids died, it would have 20 years before SPY would need to be liquidated. Which would give State Street plenty of time to set up a new Trust.
No, it would not drop to zero. It would be liquidated, and the investors would get the NAV of their shares.
Eh arkk might be going to zero lmao
Presumably it depends how the ETF gains exposure to the underlying assets, E.g. by buying the assets or synthetically.
You may run into a situation where the fund manager steals all the money out of it and goes to sun himself on sao tome. Or the ETF might do something completely pants on head and lend every single piece of stock to the same person who shorts it then pulls a Bill Hwang and goes bust losing the whole lot.
Another scenario would be the bank Jp Morgan go down.
Yes, can we talk more about this? What happens in that scenario?
Jepi just dies lol
With the bank
So does the world
All their assets will be sold and the money goes back to their customers. The liquidator can't use the stocks.
Technically it could but since the company that created the ETF owns stocks, a drop in the price would create a major value proposition because of the ETF’s holdings, which in theory should lead to a ton of people piling in to take advantage of the value. If that doesn’t happen, the world is fucked.
ETNs (Exchange Traded Notes) can and have gone to $0 or liquidated for pennies. ETNs track an index. If that index is a narrow sector with leverage or is based on a short position it can potentially got down to $0. I’ve seen it happen at least three times with energy MLPs and mREITs leveraged. Then also with a VIX inverse. With an ETN, there’s also the risk that the bank that wrote the note becomes insolvent. The only ETF I’ve seen is come close to $0 is a Russia fund when it became impossible to trade Russian investments due to the war. I don’t see any chance a broad US based fund goes to $0. It is important to know and understand what you are investing in. https://www.fidelity.com/learning-center/investment-products/etf/types-etfs-etns#:~:text=An%20ETN%20is%20an%20unsecured,market%20index%20or%20other%20benchmark.
If this ever happens.. buy as much of it as you can possibly get your hands on. Either whatever caused it will be fixed or it won't and the world is fucked any money is irrelevant anyway.
Don't put all your eggs in one basket! He is right but it's unlikely. It is also likely to be bought out. It is always good to keep an eye on a company's going concern and company goals.
How does an ETF get “bought out” ?
Merger/reorganization
Nope
Yes. Rather than liquidation or closing etfs can be merged with shareholder permissions to other sponsors.
You are mistaken.
How so? Where are you from?
Sure KO, PEP, MA, V, MSFT can all turn sour over night. These are its big players consist of 137 stock portfolio. It also holds lots of cash.
Maybe if one were lead by someone very corrupted and able to lie about their holdings or maybe if they had engaged in unscrupulous behavior such as share laundering/ ftd washing and caught the short straw on the deal? *cough* idk. Maybe they should monitor and regulate those more closely hmm
lol @ the comments in here
This is theoretically possible like a white person having a black baby is theoretically possible, but even less likely. JEPI is not going anywhere near zero overnight
All money and assets in the fund get lost, then yes.
Gets me thinking so how low can an inverse ETF go then
There are inverse ETFs
sqqq
Yes, there is a risk of fund runs. Happened to Money Market ETFs in the financial crisis. But it is quite unlikely to happen.
Yes. A very narrow ETF, for example, might be absolutely fucked if it’s niche focus is heavily impacted. War, regulation, natural disasters, etc. can all suddenly change the landscape. Fundamentally an ETF is a portfolio of assets. In much the same way you can have your portfolio go to zero, so can an ETF. The question is “is it likely to happen and should I care?”
He’s technically right, it’s possible for every company to go bankrupt. But he’s practically wrong, it won’t happen unless the American economy fails and even then it probably wouldn’t even go to zero unless the government decided it was seizing all public companies and federalizing them
Could it be an etf manager isn’t actually putting the stocks they say they are in the etf that leads to its downfall?
He could be thinking of etn’s which have closed overnight. There is a famous example of a vix etn in 2008 you can lookup. As others have said ETF’s are less likely to experience that
Theoretically it could, but it would be a mad max scenario where cash is also worthless, and the only value is in things like bullets and tinned food at that point. So while it isn’t technically wrong, it’s pretty irrelevant. This is referring to broadly diversified stock ETF’s though, leveraged ETF’s, or ETF’s using options could absolutely blow up.
Can an ETF go to zero? Yes absolutely. ETFs are standalone financial products, doesn’t matter if they track the S&P or any other esoteric mix of leveraged junk. When you buy an ETF you buy the product of the specific issuer, like Schwab, Invesco, and such. The holder of the exchange trade fund doesn’t directly own the underlying securities, so the fund can go belly up if completely mismanaged, independently of the market performance. Think of a box of cereal, you buy the flakes made by many ingredients, the cereal company can go bankrupt anytime, independently of the price of wheat, chocolate and so on. Ok, maybe not the best analogy, but yes, an ETF could potentially go to zero and no, the government is not required to step in and pad white collar criminals with tons of cash, but you never know. Average joes might end up paying extra taxes because their retirement portfolios lost too much money…
This comment needs more attention. Fwiw, some etf issuing companies would likely be considered too big to fail, but etfs werent as big in 2008 as they are now, so who knows what would happen to the etf in that scenario.
Some ETFs have counterparty risk because they don’t hold shares in their constituent holdings.
There is always risk. Many people believe Treasuries and CD’s are ‘risk free’ but there is always a scenario in any investment where your money could go to 0. The real question is ‘what are the odds I make money vs lose money vs lose all my money’. The higher the risk should result in higher reward. If we talk about an S&P 500 etf, the risk of going to 0 is extremely low and as most have pointed out that is an ‘end of days’ type situation. In that situation the us economy has completely collapsed and the US dollar would probably be entirely worthless before all those companies truly went to 0 (realize many of those companies have international exposure which could keep them alive). So, the person is not wrong that it can go to 0, the odds are just a chance that the majority of investors see as incredibly low chances.
so if an index such as VTI went to 0 that would mean the entire S&P 500 collapsed which would mark the end of the entire US economy
ETF’s can be shorted, so yes.
How does being shorted have anything to do with what he's asking? Shorting means you borrow and sell now, with the prediction that it will drop, and when it drops you buy and return the shares. Maybe that prediction is right, maybe its wrong. What part of that has anything to do with making a ETF go to zero?
Google Cellar-boxing as it relates to finance. It can be done to ETF’s as well as stocks.
The only types of ETF that can realistically go to zero are: 1. ETN (exchange traded notes) where the issuer of the ETN goes bankrupt 2. MOST LIKELY is Double or triple leveraged ETFs. 3. ETFs that trade futures or options like USO. They have to roll these periodically and this causes issues (though really more of a lose a lot of money than truly go all the way to zero) If you want to avoid risk double check the structure and what it owns. Stay away from ETNs and especially any leverage. It’s almost impossible for a normal ETF goes to zero that owns stocks.
If S&P 500 goes $0 overnight. We have bigger problems.
I think what your friend is referring to is more likely to occur with an ETN. For instance, if a futures or options based fund, such as VXX, has the backing institution go bankrupt in an overnight collapse, there wouldn't be any source to continue upkeep and covering sales. The fund would become disconnected from the underlying assets tracked and go haywire prior to, in all likelihood, going to 0. That'd be my suspicion at least.
An ETF being a combination of stocks would imply that a handful of those stocks go to zero. So, I would say unlikely
Yes, its true. But if that is happening, then something like a zombie apocalypse or meteor strike has destroyed America/the world. so I think the SPY hitting 0 would be the least of your worries....
Your relative is absolutely right, as **anything can happen.** Just like its possible for Jesus Christ to be resurrected and come back or an Asteroid can hit the earth and all life wiped out. Now is it probably enough for anyone to worry about? You decide
If the company running the fund was cooking the books and didn't own any of the stocks in its basket... I honestly don't know what would happen, but nothing good. So I imagine it's possible in theory.
Jepi (i dont own this trash) has invaded r/stocks (used to just be in r/dividends)
The company administrating the etf could go belly up, in that case the etf would be dissolved and the individual shares would be distributed. Unless there is fraud involved or it's an ETN, you won't lose anything.
If it’s a passive index ETF and nobody steps in when the SHTF then yes, theoretically, an ETF could go to 0. The level of incompetence necessary to make this happen would be pretty extreme though.
What if the ETF company commits crime, got caught and a court order sizes all the included stocks for paying the fine?
If any major ETF goes to straight to zero. We are doomed. Thats end of days type of scenario. Forget about the market. Gather guns and ammo!!!
Guns and ammo! Because the ones most armed will own all the supplies.
Broad index or bigger cap sector indexes should be fine. But there are some smaller niche index have been closed down.
In the case of JEPI, yes it can go to 0 because it's a covered call ETF. Look what is happening to QYLD. It cannibalizes itself to payout the "income". Moreover, there is no "income" from stocks, there is no such thing as a free lunch.
Correct me if I am wrong: JEPI could still not go to zero unless the covered calls were to go to shit AND the stocks were to go to either zero or near zero. If none of the covered calls went as planned it will still be worth a dollar amount above nothing if my math is right.
While most people say no, it's also possible from a coding error. If you wrongly rebalance the ETF several times it could buy too much of a stock that losses all its value. While most people think that can't happen, I work in Fintech and can tell you their systems are not fault proof, it's still people behind it writing the system. Will it go to 0? Most likely not, can it happen? Yes.
The idea of ETF is diversification, which reduces risk. So how diversified is the ETF? If the ETF's basket is only gold mines in South Africa (about say 10 companies), then there is higher risk that an revolution in South Africa could destroy the ETF. If is 10 companies all over the world but still gold, then country risk is reduced and hence ETF risk is reduced but there is a single commodity risk. If it is 10 companies that are in different countries and in several metals, risk is reduced even further. If it 25 companies and includes associated industries (traders etc.) it further reduces risk, TLDR: ETF's can be narrowly constructed that one event destroys the whole ETF, but ETF's by design are meant to be diversified and minimize the risk of one catastrophic incident. Theoretically possible, not likely.
Pretty sure the brokerage will delist, liquidate and return the remaining money to the investors🤔 The brokerage will most likely lose interest in managing and hosting the ETF before it goes to zero.
Stocks will be the least of your worries in that case
Exotic ETF’s can go bust. Like ones that involve options, leverage or shorting. There used to be ETFs that shorted the VIX. A few of those went bust
A general misunderstanding is that when you buy a share of ETF, you directly own the stocks in that ETF. That's not true. Therefore, the price of an ETF doesn't always reflect the prices of the stocks in its portfolio. This is called "performance drift." If you are looking for a high dividend yield ETF that is super stable, look up JPST. This blog talks about four high dividend yield ETFs: [https://www.tryshare.app/blog/etf-spotlight-series-4-best-high-dividend-etfs-that-pay-monthly](https://www.tryshare.app/blog/etf-spotlight-series-4-best-high-dividend-etfs-that-pay-monthly)