00:00I guess one way we can start to explore what the psychology of investors is right now is to hear
00:05from you about how they are directing their investments when they're doing it themselves, when they're making their own decisions,
00:11as opposed to following along in their managed portfolios.
00:15What are you seeing from your investor base as they navigate this volatility?
00:21So some of you may not know Betterment is a managed portfolio or has been a managed portfolio product for
00:26a very long time where we manage the portfolios for you, much like your previous guest.
00:30About six months ago, we rolled out the ability for clients to manage their own investments, set the trades themselves
00:35and so on.
00:36And of course, there's a question of like, you know, if you've got a well diversified ETF portfolio over here,
00:40what are people going to do in their self-directed holdings?
00:43We're now months in and I went in this morning to check and I want you guys to actually guess
00:47what do you think is the number one holding that people have chosen to trade themselves?
00:52Man, that's a great question. I'm going to be really bearish and say cash, but gold.
00:58Yeah, that's a good one.
01:00Bitcoin?
01:02Bitcoin. I like it.
01:03Okay, so we've got Bitcoin, cash and gold.
01:06Yeah.
01:06Popularity, number one holding, VOO.
01:09Oh, okay. All right.
01:11Vanguardian impulse.
01:13I think there's a lot of...
01:14It's America's trade.
01:16It's, you know, the safe bet, right?
01:17And maybe it's a matter of market timing.
01:19They want to know when to get in and out and it's still a great vehicle to do that.
01:22I've been surprised, pleasantly surprised about what our customers are doing.
01:25It is really interesting.
01:27It actually goes back and forth between well-diversified ETFs.
01:30We've got VOO, we've got VTI, we've got QQQ with things that are very similar to them nowadays because of
01:35the sort of large cap growth.
01:37So you've got NVIDIA, Amazon, Google, Apple.
01:42The top 10 holdings read like the top 10 holdings of the market, sometimes inside of an ETF, sometimes going
01:47direct to the stock.
01:49Dan, related to this, we were looking at your, the biggest buys for Betterment over the past quarter in your
01:5513F.
01:56And it was interesting.
01:57The top buy, speaking of VOO, is SPYM.
02:00This is State Street's sort of answer to the other three S&P.
02:04It's two basis points.
02:06And I know you, you're a vanguardian at heart.
02:08And I have to think, did you, are you replacing VOO with SPYM to save that basis point?
02:16We love how markets are so efficient that this is what happens.
02:20I'm perfectly happy.
02:22I don't know the economics of it, but I know that it's good for our clients if we're lowering their
02:25expense ratios.
02:26As long as it's done as sort of a responsible, you can trade it.
02:29It's liquid.
02:30There's no sort of hidden tax consequences.
02:32The investing team looks at this on a quarterly basis and says, what's the best offering out there right now?
02:37What should we be putting people into?
02:39And if they choose SPYM, there's a very good reason for that.
02:43I am, I do want to go back to, you know, the self-directed portfolios.
02:46It's fascinating again that VOO has been the most popular choice.
02:50What are you seeing in terms of activity, in terms of turnover?
02:54Because, you know, you think about sort of traditional model portfolio.
02:58It's rebalancing maybe a couple times, a few times a year.
03:02How active, though, are these sort of self-directed investors?
03:06It's actually really interesting.
03:08So let me nerd out for just a second.
03:10One of the longstanding things we've known about self-directed investors, starting from the 1990s with self-directed brokerages, is
03:17that they're actually not bad at timing their buys.
03:20And so far, Betterment customers have been net buyers into the self-directed holdings, and they've been pretty good at
03:26timing what they buy.
03:27On the other hand, where you tend to see some problems where performance tends to lack for individual traders is
03:32on the sells.
03:33And I have to say, we've not had enough data.
03:35It's not been long enough for me to say, like, are they timing their sells as well as they're timing
03:38their buys?
03:39However, the buys have been opportunistic and a little bit more linked to how markets are moving and how those
03:45individual stocks are moving than are the managed portfolios that we manage for them.
03:49So, Dan, you talk about Gen Z and how they've been trying to do their own stock picking, and they're
03:54kind of, like, throwing their hands up.
03:56And they're like, you know what?
03:56This is actually hard.
03:58I'm just going to, you know, I just want to chill and buy an index fund.
04:03You know, on our team, we have a phrase that today's the gen is tomorrow's vanguardian.
04:07It happens to the best of us.
04:09Is that what you're seeing with the younger generation?
04:11Are they starting to go from that sort of day trading lottery ticket mode to buy and hold?
04:17So, you know, the Ferris Bueller life comes at you pretty fast.
04:21I feel like for each generation, life is coming at them a little bit faster.
04:25So go back, gosh, it was a decade now.
04:28And I say we had the meme stock craze, you know, your AMCs, your BlackBerrys.
04:33And I think a lot of people, because either it was COVID or it was the focus on the meme
04:37stocks, a lot of people kind of had their, you know, early first hazing ritual about stocks early.
04:43It brought everybody into the market.
04:44They did a lot of self-directed investing.
04:46They got engaged.
04:47They're like, how does this work?
04:48Okay, I can do this.
04:49I've demystified it for myself.
04:51Maybe I don't want to keep doing this.
04:52Maybe this is actually kind of boring and I've got better things to be doing with my time.
04:55So, in general, I think there's a kind of interesting growth curve every generation goes through.
05:00And it's a question of when and how quickly do they hit it, where it's like, I'm interested in this
05:04because I hear it being reported in the news or I have friends who have gained access to it.
05:08I want to experience and get exposure.
05:10You do it and very quickly you go through the school of hard stocks and you learn that maybe this
05:15isn't quite as easy as you might have heard about.
05:17Right.
05:17And you say, investing is good.
05:19I want exposure to the growth, but I don't want to have to be on top of it every single
05:22day.
Comments