Are new ETFs worth the hype?
Today, we’ve got Nick Nicolaides, the founder of Pearler, back on the show. Pearler have been a wonderful long-term partner of the podcast and enables you to buy and sell shares and ETFs, automate your investments and track your portfolio.
In today’s conversation, we’re tackling a topic Nick is very familiar with: ETFs. Specifically, what are thematic ETFs, how new ETFs come to market and how to know if you’re falling prey to an ETF hype cycle. Plenty for brand-new and experienced ETF investors to take away today, so let’s jump right in!
- To set the scene for this conversation, can you explain broadly what thematic ETFs are and share some examples of popular themes?
- Are thematic ETFs good or bad for new investors?
- Talk to us about hyped-up ETFs. What are you seeing from a broker and customer data perspective?
- What does the new ETF marketing playbook look like? What should we look out for as informed investors?
- What are some signs you’re falling prey to an investing hype cycle?
- Day 1 of a new ETF. From a broker’s perspective?
How do Hype Cycles work? (from Gartner)
Each Hype Cycle drills down into the five key phases of a technology’s life cycle (source: Gartner).
- Innovation Trigger: A potential technology breakthrough kicks things off. Early proof-of-concept stories and media interest trigger significant publicity. Often no usable products exist and commercial viability is unproven.
- Peak of Inflated Expectations: Early publicity produces a number of success stories — often accompanied by scores of failures. Some companies take action; many do not.
- Trough of Disillusionment: Interest wanes as experiments and implementations fail to deliver. Producers of the technology shake out or fail. Investments continue only if the surviving providers improve their products to the satisfaction of early adopters.
- Slope of Enlightenment: More instances of how the technology can benefit the enterprise start to crystallise and become more widely understood. Second- and third-generation products appear from technology providers. More enterprises fund pilots; conservative companies remain cautious.
- Plateau of Productivity: Mainstream adoption starts to take off. Criteria for assessing provider viability are more clearly defined. The technology’s broad market applicability and relevance are clearly paying off.
