WisdomTree NTSX now has siblings NTSI and NTSE launched today

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Winthorpe
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WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by Winthorpe »

I purchased 62 shares of NTSE at Fidelity today, just as a test run. Who plans to substitute their developed international and emerging markets with these new funds? Why or why not?

https://www.wisdomtree.com/strategies/e ... -core-etfs

Winthorpe
muffins14
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by muffins14 »

I’m not thrilled at the expense ratio, I assume approximately one could probably use 90% VTI and 10% EDV and have much lower expenses, perhaps with less overall duration exposure though

Maybe taxes from NTSI would be a bit lower for higher brackets due to the tax treatment on futures?
snailderby
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by snailderby »

I'm definitely interested. How was the bid/ask spread when you bought NTSI and NTSE today?
caklim00
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by caklim00 »

I have 0 interest in NTSX and NTSI since I use SCV ETFs for my non-401k funds. That said NTSE is somewhat intriguing since AVEM (my current EM vehicle) is core with SCV and profitability tilt. I won't be making any changes (yet) but will keep my eye on this over the next year.
000
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by 000 »

No plans. I am more bullish on stocks than treasury futures. I think bonds and bond futures are a bad place to be right now.

Now if bonds are yielding double digits again then maybe I'll take another look. Ultimately these funds are not that hard to implement and the ER is kind of hard to justify. It would be easier to stomach an all-world version because that would really be hands off as opposed to requiring one to deal with three different ETFs. Couldn't WisdomTree just make an all-world version with NTSX, NTSI, and NTSE as underlying holdings?
DMoogle
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by DMoogle »

muffins14 wrote: Thu May 20, 2021 3:08 pm I’m not thrilled at the expense ratio, I assume approximately one could probably use 90% VTI and 10% EDV and have much lower expenses, perhaps with less overall duration exposure though

Maybe taxes from NTSI would be a bit lower for higher brackets due to the tax treatment on futures?
Can't really do a 1:1 compare 90/10 VTI and EDV, since this approach is really more like 90/60 stock/bond, not 90/10.

I don't want to mess with futures myself (yet), so I have a decent amount of NTSX and plan to buy some NTSI. NTSE is a bit more of a stretch, but I might target like 5% of my portfolio in it.
rchmx1
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by rchmx1 »

DMoogle wrote: Fri May 21, 2021 12:05 am I don't want to mess with futures myself (yet), so I have a decent amount of NTSX and plan to buy some NTSI. NTSE is a bit more of a stretch, but I might target like 5% of my portfolio in it.
Are you saying you think there's something specific about NTSE that makes you feel that way? Or do you just mean that you're personally skeptical of investing in EM, so NTSE doesn't really fit into your IPS?
calcada
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by calcada »

Why didn't they just make a NTSW for World?

I wonder if they would launch it in the future.
DMoogle
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by DMoogle »

rchmx1 wrote: Fri May 21, 2021 1:13 am
DMoogle wrote: Fri May 21, 2021 12:05 am I don't want to mess with futures myself (yet), so I have a decent amount of NTSX and plan to buy some NTSI. NTSE is a bit more of a stretch, but I might target like 5% of my portfolio in it.
Are you saying you think there's something specific about NTSE that makes you feel that way? Or do you just mean that you're personally skeptical of investing in EM, so NTSE doesn't really fit into your IPS?
The latter. Seems like the general Bogleheads approach is to put little weight into EM, if at all. The Wiki page on it (https://www.bogleheads.org/wiki/Emerging_market_stocks) states "Vanguard suggests that investors should allocate between 10% to 15% of the international allocation to emerging market stocks." The typical recommendation for % of portfolio in international is ~20%, right? So that suggests that EM, as a percentage of total portfolio, should be 2%-3%.

Personally I think I prefer larger weight in international overall... maybe closer to 30% of total portfolio. So something like 70/25/5 NTSX/NTSI/NTSE seems OK.
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by muffins14 »

DMoogle wrote: Fri May 21, 2021 12:05 am
muffins14 wrote: Thu May 20, 2021 3:08 pm I’m not thrilled at the expense ratio, I assume approximately one could probably use 90% VTI and 10% EDV and have much lower expenses, perhaps with less overall duration exposure though

Maybe taxes from NTSI would be a bit lower for higher brackets due to the tax treatment on futures?
Can't really do a 1:1 compare 90/10 VTI and EDV, since this approach is really more like 90/60 stock/bond, not 90/10.

I don't want to mess with futures myself (yet), so I have a decent amount of NTSX and plan to buy some NTSI. NTSE is a bit more of a stretch, but I might target like 5% of my portfolio in it.
It’s not quite so simple, for example: would you rather have 100k of treasuries with duration 6 years or 50k of treasuries with duration 12 years? How would the movements in portfolio value look with a 1% change in rates in each situation?
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by DMoogle »

muffins14 wrote: Fri May 21, 2021 8:58 am It’s not quite so simple, for example: would you rather have 100k of treasuries with duration 6 years or 50k of treasuries with duration 12 years? How would the movements in portfolio value look with a 1% change in rates in each situation?
I agree with your point. I wasn't sure if you realized the extent of the leverage. In this case, assuming you have a $100k portfolio, it would be like comparing:
$90k exposure to VTI (TSM)
$10k exposure to EDV (avg ~25y duration)

vs. NTSI, which is effectively:
$90k exposure to TSM
$60k exposure to treasury ladder @ avg ~7y duration
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by rchmx1 »

DMoogle wrote: Fri May 21, 2021 8:11 am
The latter. Seems like the general Bogleheads approach is to put little weight into EM, if at all. The Wiki page on it (https://www.bogleheads.org/wiki/Emerging_market_stocks) states "Vanguard suggests that investors should allocate between 10% to 15% of the international allocation to emerging market stocks." The typical recommendation for % of portfolio in international is ~20%, right? So that suggests that EM, as a percentage of total portfolio, should be 2%-3%.

Personally I think I prefer larger weight in international overall... maybe closer to 30% of total portfolio. So something like 70/25/5 NTSX/NTSI/NTSE seems OK.
Ok got it, thanks. Ya, at such a small percentage it's not going to make much a difference. I've skipped it for the same reason, but I like this strategy enough, and feel like I do need to increase my exposure to ex-us overall, so I plan to get to around those percentages once the spread closes a bit.
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by snailderby »

DMoogle wrote: Fri May 21, 2021 8:11 am The latter. Seems like the general Bogleheads approach is to put little weight into EM, if at all. The Wiki page on it (https://www.bogleheads.org/wiki/Emerging_market_stocks) states "Vanguard suggests that investors should allocate between 10% to 15% of the international allocation to emerging market stocks." The typical recommendation for % of portfolio in international is ~20%, right? So that suggests that EM, as a percentage of total portfolio, should be 2%-3%.

Personally I think I prefer larger weight in international overall... maybe closer to 30% of total portfolio. So something like 70/25/5 NTSX/NTSI/NTSE seems OK.
Not to derail this thread, but I don't think there's a clear consensus on this forum regarding how much to allocate to emerging markets, or international for that matter. But that may be a better topic for another thread.
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by anon_investor »

snailderby wrote: Fri May 21, 2021 6:10 pm
DMoogle wrote: Fri May 21, 2021 8:11 am The latter. Seems like the general Bogleheads approach is to put little weight into EM, if at all. The Wiki page on it (https://www.bogleheads.org/wiki/Emerging_market_stocks) states "Vanguard suggests that investors should allocate between 10% to 15% of the international allocation to emerging market stocks." The typical recommendation for % of portfolio in international is ~20%, right? So that suggests that EM, as a percentage of total portfolio, should be 2%-3%.

Personally I think I prefer larger weight in international overall... maybe closer to 30% of total portfolio. So something like 70/25/5 NTSX/NTSI/NTSE seems OK.
Not to derail this thread, but I don't think there's a clear consensus on this forum regarding how much to allocate to emerging markets, or international for that matter. But that may be a better topic for another thread.
EM makes up 25% of VXUS. So if you are aiming for close to market weight you would hold 75% NTSI / 25% NTSE for your "international" allocation.
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by snailderby »

anon_investor wrote: Fri May 21, 2021 6:25 pm
snailderby wrote: Fri May 21, 2021 6:10 pm
DMoogle wrote: Fri May 21, 2021 8:11 am The latter. Seems like the general Bogleheads approach is to put little weight into EM, if at all. The Wiki page on it (https://www.bogleheads.org/wiki/Emerging_market_stocks) states "Vanguard suggests that investors should allocate between 10% to 15% of the international allocation to emerging market stocks." The typical recommendation for % of portfolio in international is ~20%, right? So that suggests that EM, as a percentage of total portfolio, should be 2%-3%.

Personally I think I prefer larger weight in international overall... maybe closer to 30% of total portfolio. So something like 70/25/5 NTSX/NTSI/NTSE seems OK.
Not to derail this thread, but I don't think there's a clear consensus on this forum regarding how much to allocate to emerging markets, or international for that matter. But that may be a better topic for another thread.
EM makes up 25% of VXUS. So if you are aiming for close to market weight you would hold 75% NTSI / 25% NTSE for your "international" allocation.
It might be closer to 30% because NTSI and NTSE follow a different set of indexes that doesn't include Canada and treats South Korea as an emerging market. Of course, if DMoogle doesn't want to hold everything at market cap weight, that's another conversation for another thread. :)
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by DMoogle »

Interesting, I didn't realize VXUS was 25% EM. Never really thought about it before, to be honest.

Honestly, I'm not stressing over the details. Who knows whether US or ex-US will perform best moving forward. In broad strokes, I like the concept of these funds. Maybe one day I'll properly learn futures and go a DIY route, but for now, I'm happy that they added international options.
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by watchnerd »

Joining the thread.

I was hoping the bond piece would be foreign bonds instead of Treasuries, but I'm still curious about them.
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by comeinvest »

watchnerd wrote: Fri May 21, 2021 7:56 pm Joining the thread.

I was hoping the bond piece would be foreign bonds instead of Treasuries, but I'm still curious about them.
Look at the current foreign government bond yields, and tell me if you are still hoping the same.
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by Horton »

DMoogle wrote: Fri May 21, 2021 11:14 am
muffins14 wrote: Fri May 21, 2021 8:58 am It’s not quite so simple, for example: would you rather have 100k of treasuries with duration 6 years or 50k of treasuries with duration 12 years? How would the movements in portfolio value look with a 1% change in rates in each situation?
I agree with your point. I wasn't sure if you realized the extent of the leverage. In this case, assuming you have a $100k portfolio, it would be like comparing:
$90k exposure to VTI (TSM)
$10k exposure to EDV (avg ~25y duration)

vs. NTSI, which is effectively:
$90k exposure to TSM
$60k exposure to treasury ladder @ avg ~7y duration
The impact of a 1% change in interest rates would be pretty similar for these, which I think was muffins’ original point.
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by watchnerd »

comeinvest wrote: Fri May 21, 2021 9:08 pm
watchnerd wrote: Fri May 21, 2021 7:56 pm Joining the thread.

I was hoping the bond piece would be foreign bonds instead of Treasuries, but I'm still curious about them.
Look at the current foreign government bond yields, and tell me if you are still hoping the same.
Yep, still hoping for the same, as long as it is unhedged.
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by anon_investor »

watchnerd wrote: Fri May 21, 2021 10:12 pm
comeinvest wrote: Fri May 21, 2021 9:08 pm
watchnerd wrote: Fri May 21, 2021 7:56 pm Joining the thread.

I was hoping the bond piece would be foreign bonds instead of Treasuries, but I'm still curious about them.
Look at the current foreign government bond yields, and tell me if you are still hoping the same.
Yep, still hoping for the same, as long as it is unhedged.
Do you have unhedged international bonds now?
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by watchnerd »

anon_investor wrote: Fri May 21, 2021 10:25 pm
Do you have unhedged international bonds now?
I wish.

But it's a Hobson's choice.

BNDX is diverse (govt and corp), low ER, but hedged.

BWX is unhedged, not diverse (all govt), and high ER

I'm holding my nose in distaste and holding the lower ER, hedged option.
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by anon_investor »

watchnerd wrote: Fri May 21, 2021 10:28 pm
anon_investor wrote: Fri May 21, 2021 10:25 pm
Do you have unhedged international bonds now?
I wish.

But it's a Hobson's choice.

BNDX is hedged, diverse (govt and corp), but low ER.

BWX is unhedged, not diverse (all govt), and high ER

I'm holding my nose in distaste and holding the lower ER option, hedged option.
Are hedged international bonds even worth it over just US bonds? I am assuming WisdomTree just used US treasuries because of the lower correlation with equities. I am not sure how international bonds act.
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by watchnerd »

anon_investor wrote: Fri May 21, 2021 10:31 pm
Are hedged international bonds even worth it over just US bonds? I am assuming WisdomTree just used US treasuries because of the lower correlation with equities. I am not sure how international bonds act.
Wisdom Tree isn't trying to make a comprehensive bond port to match up to the stocks, even in NTSX -- it's not TBM.

They're just adding leveraged risk-free assets, which for US customers buying in USD, makes sense to use Treasuries.

In the Eurozone, they'd probably use German Bunds or something.
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by physixfan »

Nice. But I hope they use foreign treasuries instead of US treasuries in the bond part.
Also, hope NTSX can attract more investors thus has more liquidity...
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by Tipro »

physixfan wrote: Sat May 22, 2021 1:20 am Nice. But I hope they use foreign treasuries instead of US treasuries in the bond part.
Also, hope NTSX can attract more investors thus has more liquidity...
For what it's worth, Wisdom Tree's brochure for these funds (https://www.wisdomtree.com/-/media/us-m ... family.pdf) notes that over the last 20 years, all three sectors (US large cap, developed intl and emerging) have had negative correlations with 7 to 10 year treasuries. It also has some neat graphs showing fluctuations in that correlation over time.
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by DMoogle »

So it's been nearly 2 weeks since this launched. NTSI currently only has $2M total assets; 50k shares outstanding. https://www.wisdomtree.com/etfs/efficient-core/ntsi

I like the product concept, and honestly would be willing to buy like $50k or so, but I've never bought such a new ETF, so I'm a little worried. Specifically: with so little trading volume, I'm concerned I won't get a fair price. Is that a reasonable concern? I'm used to buying more established ETFs.

Plus, if the fund closes, then any gains are immediately realized, right? Is it normal for a new ETF to have such little volume?

I ran a back-of-the-envelope simulation of doing a futures portfolio vs. this+margin, and assuming I hold for a long enough period of time and margin rates stay low, this is the likely winner.
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by Buttery Lobster »

I've been curious about these two ETFs myself, for tax deferred accounts only. The bid/ask spreads this afternoon seemed a bit better than they've been previously, around $0.05-$0.07, around around 0.15% give or take. WisdomTree closed some funds last year, so I'm personally concerned about buying in taxable. There are more funds than individual stocks now, so I think it's pretty common for many to have such low volume. The underlying large caps in these ETFs are very liquid though, which I've heard is more important than the overall trading volume of the ETF itself (could be wrong though!).
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by jt4 »

Did I miss where it states which indices the equity portion of these funds track? (perhaps somewhere in the prospectus?)

If someone knows, could they please share?

(I believe that NTSX doesn't explicitly state that it tracks the S&P500 to avoid paying licensing fees to the S&P.)
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by DMoogle »

jt4 wrote: Wed Jun 02, 2021 10:40 pm Did I miss where it states which indices the equity portion of these funds track? (perhaps somewhere in the prospectus?)

If someone knows, could they please share?

(I believe that NTSX doesn't explicitly state that it tracks the S&P500 to avoid paying licensing fees to the S&P.)
It doesn't explicitly state that it tracks the S&P500, but it appears to. It just says "large cap," but I did a comparison of the portfolio holdings, and they seemed to match up pretty well.

I tried placing an order for 100 shares of NTSI using IB's Midpoint methodology earlier today. It didn't fill. :? Bought another 1000 shares of NTSX though.
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by jhsu802701 »

While I'm a big fan of certain WisdomTree funds (DFJ, DGS, and DGRE), I just don't understand the point of NTSX, NTSI, and NTSE. Even if I wanted to own bonds or bet on the direction of interest rates (which I don't), I'd rather just buy my bonds, bond funds, or bond futures separately.

Although I'm bullish on international stocks and own several ETFs consisting of them, NTSI and NTSE don't offer anything of value that my top picks do not. In fact, they have roughly the same price/book ratio of DGRE (emerging markets dividend growth) WITHOUT DGRE's focus on premium quality stocks.
DFJ: Japan - small cap dividend | DGS: emerging, small cap dividend | MOTI: international moat stocks | IQIN: large cap, developed | DGRE: emerging, dividend growth | GWX and FNDC: small cap, developed
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by jt4 »

DMoogle wrote: Wed Jun 02, 2021 11:30 pm
jt4 wrote: Wed Jun 02, 2021 10:40 pm Did I miss where it states which indices the equity portion of these funds track? (perhaps somewhere in the prospectus?)

If someone knows, could they please share?

(I believe that NTSX doesn't explicitly state that it tracks the S&P500 to avoid paying licensing fees to the S&P.)
It doesn't explicitly state that it tracks the S&P500, but it appears to. It just says "large cap," but I did a comparison of the portfolio holdings, and they seemed to match up pretty well.

I tried placing an order for 100 shares of NTSI using IB's Midpoint methodology earlier today. It didn't fill. :? Bought another 1000 shares of NTSX though.
OK, thanks! Their Case for WidsomTree Efficient Core Fund Family brochure suggests the equity portion of
  • NTSX approximates S&P500
  • NTSI approximates MSCI EAFE
  • NTSE approximates MSCI Emerging Markets Index

Can anyone suggest a site or analyzer that compares the equity holdings of these funds with their respective indexes above to see if they are indeed holding the right basket of stocks to approximate these indices?
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by Tingting1013 »

Are these funds preferable to just taking out a 1% margin loan for 50% of your asset value and buying VGIT?
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by ckangas »

Tingting1013 wrote: Thu Jun 03, 2021 12:17 am Are these funds preferable to just taking out a 1% margin loan for 50% of your asset value and buying VGIT?
Their expense ratios are below .5%. So I'd hazard yes?

Leverage would reduce volatility decay on the treasuries side I suppose. I'll let someone who has thought about it more answer whether that's a net gain or loss in this case.
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by comeinvest »

DMoogle wrote: Tue Jun 01, 2021 7:33 pm So it's been nearly 2 weeks since this launched. NTSI currently only has $2M total assets; 50k shares outstanding. https://www.wisdomtree.com/etfs/efficient-core/ntsi

I like the product concept, and honestly would be willing to buy like $50k or so, but I've never bought such a new ETF, so I'm a little worried. Specifically: with so little trading volume, I'm concerned I won't get a fair price. Is that a reasonable concern? I'm used to buying more established ETFs.

Plus, if the fund closes, then any gains are immediately realized, right? Is it normal for a new ETF to have such little volume?

I ran a back-of-the-envelope simulation of doing a futures portfolio vs. this+margin, and assuming I hold for a long enough period of time and margin rates stay low, this is the likely winner.
Can I ask you what were your assumptions and parameters of your WisdomTree vs. futures comparison? How can the funds be better than futures when the funds use futures themselves plus a fee.
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by DMoogle »

comeinvest wrote: Thu Jun 03, 2021 1:16 am Can I ask you what were your assumptions and parameters of your WisdomTree vs. futures comparison? How can the funds be better than futures when the funds use futures themselves plus a fee.
It was really back of the envelope, and I just revisited what I did and realized my assumptions had overaggressive returns and oversimplified. Basically I'm comparing this:

$1,000 exposure via futures portfolio vs. $1,000 NTSX financed with margin

Assumptions:
Rate of return (for both) = 10% (assumed 15% before)
Margin rate = 1.6%
ER = 0.2%
LTCG rate = 15%
STCG rate = 24%
Blended tax rate for futures portfolio = 18.6%
Yield for NTSX = 1%
Time horizon = 20 years.

I assumed futures portfolio would pay the blended tax rate on the gain every year, and the NTSX portfolio would pay the STCG rate on the yearly yield every year, but only the LTCG rate after 20 years. The tax efficiency here is where the value comes from.

Using these assumptions, $1000 in futures portfolio comes out to $4,783, while in NTSX with margin it comes out to $4,322. Margin provides a BIG benefit with the ability to delay LTCG tax until the end, but it looks like it's still not enough to keep up with the lack of interest payments+ER from a futures portfolio.

That said... doing futures myself still makes me kinda nervous, so the simplicity in NTSX might be worth forgoing that route. Dunno yet.

I can post my 5 minute Excel worksheet if you'd like.
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by stormcrow »

jhsu802701 wrote: Wed Jun 02, 2021 11:45 pm While I'm a big fan of certain WisdomTree funds (DFJ, DGS, and DGRE), I just don't understand the point of NTSX, NTSI, and NTSE. Even if I wanted to own bonds or bet on the direction of interest rates (which I don't), I'd rather just buy my bonds, bond funds, or bond futures separately.

Although I'm bullish on international stocks and own several ETFs consisting of them, NTSI and NTSE don't offer anything of value that my top picks do not. In fact, they have roughly the same price/book ratio of DGRE (emerging markets dividend growth) WITHOUT DGRE's focus on premium quality stocks.
You are correct in the stock holdings of these funds, but missing the additional bond futures component. Basically, in one fund you get a 90/60 stock & bond allocation (to somewhat oversimplify). To do this on your own at the same price level would require futures, which is of course, doable.

Also, as a side note, I find your tracking of potentially undervalued markets very interesting. I only wish I was more persuaded that mean reversion is always applicable.
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by SafeBonds »

No one should invest in this because no one should invest in a leveraged investment if they either a.) Do not understand how to implement this strategy on their own or b.) Do not understand how big a deal it would be to save yourself this expense ratio

I considered such a strategy years ago but decided to be unlevered. At the time they already had S&P 500 E-Mini contracts. Since then they invented "Micro E-Minis". It reminds me of the episode of The Office when Kevin complained about mini cupcakes. "Cupcakes are already mini cakes, and now you have mini CUPcakes? When will it stop with you people!?"
ckangas
Posts: 64
Joined: Fri May 21, 2021 8:08 pm

Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by ckangas »

SafeBonds wrote: Thu Jun 03, 2021 12:00 pm No one should invest in this because no one should invest in a leveraged investment if they either a.) Do not understand how to implement this strategy on their own or b.) Do not understand how big a deal it would be to save yourself this expense ratio

I considered such a strategy years ago but decided to be unlevered. At the time they already had S&P 500 E-Mini contracts. Since then they invented "Micro E-Minis". It reminds me of the episode of The Office when Kevin complained about mini cupcakes. "Cupcakes are already mini cakes, and now you have mini CUPcakes? When will it stop with you people!?"
The NTSX family does not seem particularly difficult to understand; at least only marginally more than something like VOO.

I feel like leverage is often reacted to as all or nothing. Being leveraged in the S&P500 at 1.2 is very different than being leveraged at 3. I don't think there are many good use cases for 3, but 1.2 (or perhaps 1.1, 1.3, etc.) makes sense for certain use cases involving young investors with high risk appetites where their human capital greatly outweighs their current investments.
ljford7
Posts: 91
Joined: Tue Jul 06, 2010 8:15 pm

Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by ljford7 »

SafeBonds wrote: Thu Jun 03, 2021 12:00 pm No one should invest in this because no one should invest in a leveraged investment if they either a.) Do not understand how to implement this strategy on their own or b.) Do not understand how big a deal it would be to save yourself this expense ratio
This really isn't correct and should be changed to "no one should invest in any investment without knowing the risk that is involved."

You don't need to know how options/futures/derivatives/etc. work (that is what you are paying the fund managers for).
comeinvest
Posts: 400
Joined: Mon Mar 12, 2012 6:57 pm

Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by comeinvest »

DMoogle wrote: Thu Jun 03, 2021 9:50 am
comeinvest wrote: Thu Jun 03, 2021 1:16 am Can I ask you what were your assumptions and parameters of your WisdomTree vs. futures comparison? How can the funds be better than futures when the funds use futures themselves plus a fee.
It was really back of the envelope, and I just revisited what I did and realized my assumptions had overaggressive returns and oversimplified. Basically I'm comparing this:

$1,000 exposure via futures portfolio vs. $1,000 NTSX financed with margin

Assumptions:
Rate of return (for both) = 10% (assumed 15% before)
Margin rate = 1.6%
ER = 0.2%
LTCG rate = 15%
STCG rate = 24%
Blended tax rate for futures portfolio = 18.6%
Yield for NTSX = 1%
Time horizon = 20 years.

I assumed futures portfolio would pay the blended tax rate on the gain every year, and the NTSX portfolio would pay the STCG rate on the yearly yield every year, but only the LTCG rate after 20 years. The tax efficiency here is where the value comes from.

Using these assumptions, $1000 in futures portfolio comes out to $4,783, while in NTSX with margin it comes out to $4,322. Margin provides a BIG benefit with the ability to delay LTCG tax until the end, but it looks like it's still not enough to keep up with the lack of interest payments+ER from a futures portfolio.

That said... doing futures myself still makes me kinda nervous, so the simplicity in NTSX might be worth forgoing that route. Dunno yet.

I can post my 5 minute Excel worksheet if you'd like.
Thanks for clarifying. In taxable, the taxes are a big factor. I would make the following comments to your math:
- I personally am hesitant to put any ETF in taxable, as I don't know how long it will survive, and if I still like it in 10, 20, or 30 years, or if it will fit the mainstream or my own investment philosophy at that time - or I will face a tax burden that will annihilate the potential tax advantage. What if government bonds yield negative by then (for example)?
- There was a thread here that discussed the low distribution of NTSX, and I think it had no explanation and it was not clear if that can be extrapolated in the future.
- For these reasons, and for those to who tax-advantaged accounts are available, I would consider putting this strategy in its entirety into tax-advantaged.

A little bit off-topic, but I am running a DIY strategy with futures similar to that of NTSX, with a few little twists. NTSX is maybe a bit rigid: They allocate equal amounts to futures corresponding to government bonds with 2, 5, 7, 10, and 15 year maturities. Look at the current yield curve http://www.worldgovernmentbonds.com/cou ... ed-states/ . 2-year bonds yield ca. 0.15% and have similarly low roll-down. I don't know what exactly the implied financing rate of 2-year treasury futures is, but if it is Libor, then the 2-year treasury futures generate close to zero returns (close to zero carry, to be precise: carry is the return assuming a static yield curve). To top it off, the 2-year treasury yield can pretty much only go up, and *will* go up based on current forward rates, resulting in an almost inevitable loss (not a question "if", but "when") with close to zero upside potential. As a result, I eliminated this part of my treasury futures allocation, until the yield curve is more flat. If you buy NTSX, you are stuck with this component. I'm happy to do my own modified DIY version of NTSX. (I do a few other modifications, higher allocation to equities, among others, as I don't like to be only 90% in equities.) I'm happy to stand corrected if I missed something with my logic.
DMoogle
Posts: 276
Joined: Sat Oct 31, 2020 10:24 pm

Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by DMoogle »

comeinvest wrote: Thu Jun 03, 2021 5:30 pmThanks for clarifying. In taxable, the taxes are a big factor. I would make the following comments to your math:
- I personally am hesitant to put any ETF in taxable, as I don't know how long it will survive, and if I still like it in 10, 20, or 30 years, or if it will fit the mainstream or my own investment philosophy at that time - or I will face a tax burden that will annihilate the potential tax advantage. What if government bonds yield negative by then (for example)?
- There was a thread here that discussed the low distribution of NTSX, and I think it had no explanation and it was not clear if that can be extrapolated in the future.
- For these reasons, and for those to who tax-advantaged accounts are available, I would consider putting this strategy in its entirety into tax-advantaged.

A little bit off-topic, but I am running a DIY strategy with futures similar to that of NTSX, with a few little twists. NTSX is maybe a bit rigid: They allocate equal amounts to futures corresponding to government bonds with 2, 5, 7, 10, and 15 year maturities. Look at the current yield curve http://www.worldgovernmentbonds.com/cou ... ed-states/ . 2-year bonds yield ca. 0.15% and have similarly low roll-down. I don't know what exactly the implied financing rate of 2-year treasury futures is, but if it is Libor, then the 2-year treasury futures generate close to zero returns (close to zero carry, to be precise: carry is the return assuming a static yield curve). To top it off, the 2-year treasury yield can pretty much only go up, and *will* go up based on current forward rates, resulting in an almost inevitable loss (not a question "if", but "when") with close to zero upside potential. As a result, I eliminated this part of my treasury futures allocation, until the yield curve is more flat. If you buy NTSX, you are stuck with this component. I'm happy to do my own modified DIY version of NTSX. (I do a few other modifications, higher allocation to equities, among others, as I don't like to be only 90% in equities.) I'm happy to stand corrected if I missed something with my logic.
Really appreciate your perspective. I'm doing some other stuff in my tax-advantaged - a mix of HFEA, a trend strategy, and some plain ol' Vanguard funds, so I'm trying to figure out what would be optimal for my taxable.

As I said, I've never engaged in futures contracts myself, so I'm a little nervous about getting started. Do you use IB? I noticed they have "continuous expiration" futures that automatically rolls over itself. I was thinking about going that route. Not sure if the futures margin requirements are cash-only or equity too - I think there was some confusion about that. If cash-only, I'll have to liquidate some of what I have. :? Not the end of the world though, since I have some old stocks that don't really fit into my current strategy.
caklim00
Posts: 2394
Joined: Mon May 26, 2008 10:09 am

Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by caklim00 »

comeinvest wrote: Thu Jun 03, 2021 5:30 pm
DMoogle wrote: Thu Jun 03, 2021 9:50 am
comeinvest wrote: Thu Jun 03, 2021 1:16 am Can I ask you what were your assumptions and parameters of your WisdomTree vs. futures comparison? How can the funds be better than futures when the funds use futures themselves plus a fee.
It was really back of the envelope, and I just revisited what I did and realized my assumptions had overaggressive returns and oversimplified. Basically I'm comparing this:

$1,000 exposure via futures portfolio vs. $1,000 NTSX financed with margin

Assumptions:
Rate of return (for both) = 10% (assumed 15% before)
Margin rate = 1.6%
ER = 0.2%
LTCG rate = 15%
STCG rate = 24%
Blended tax rate for futures portfolio = 18.6%
Yield for NTSX = 1%
Time horizon = 20 years.

I assumed futures portfolio would pay the blended tax rate on the gain every year, and the NTSX portfolio would pay the STCG rate on the yearly yield every year, but only the LTCG rate after 20 years. The tax efficiency here is where the value comes from.

Using these assumptions, $1000 in futures portfolio comes out to $4,783, while in NTSX with margin it comes out to $4,322. Margin provides a BIG benefit with the ability to delay LTCG tax until the end, but it looks like it's still not enough to keep up with the lack of interest payments+ER from a futures portfolio.

That said... doing futures myself still makes me kinda nervous, so the simplicity in NTSX might be worth forgoing that route. Dunno yet.

I can post my 5 minute Excel worksheet if you'd like.
Thanks for clarifying. In taxable, the taxes are a big factor. I would make the following comments to your math:
- I personally am hesitant to put any ETF in taxable, as I don't know how long it will survive, and if I still like it in 10, 20, or 30 years, or if it will fit the mainstream or my own investment philosophy at that time - or I will face a tax burden that will annihilate the potential tax advantage. What if government bonds yield negative by then (for example)?
- There was a thread here that discussed the low distribution of NTSX, and I think it had no explanation and it was not clear if that can be extrapolated in the future.
- For these reasons, and for those to who tax-advantaged accounts are available, I would consider putting this strategy in its entirety into tax-advantaged.

A little bit off-topic, but I am running a DIY strategy with futures similar to that of NTSX, with a few little twists. NTSX is maybe a bit rigid: They allocate equal amounts to futures corresponding to government bonds with 2, 5, 7, 10, and 15 year maturities. Look at the current yield curve http://www.worldgovernmentbonds.com/cou ... ed-states/ . 2-year bonds yield ca. 0.15% and have similarly low roll-down. I don't know what exactly the implied financing rate of 2-year treasury futures is, but if it is Libor, then the 2-year treasury futures generate close to zero returns (close to zero carry, to be precise: carry is the return assuming a static yield curve). To top it off, the 2-year treasury yield can pretty much only go up, and *will* go up based on current forward rates, resulting in an almost inevitable loss (not a question "if", but "when") with close to zero upside potential. As a result, I eliminated this part of my treasury futures allocation, until the yield curve is more flat. If you buy NTSX, you are stuck with this component. I'm happy to do my own modified DIY version of NTSX. (I do a few other modifications, higher allocation to equities, among others, as I don't like to be only 90% in equities.) I'm happy to stand corrected if I missed something with my logic.
I did this last year: viewtopic.php?t=304904
comeinvest
Posts: 400
Joined: Mon Mar 12, 2012 6:57 pm

Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by comeinvest »

DMoogle wrote: Fri Jun 04, 2021 8:52 am Really appreciate your perspective. I'm doing some other stuff in my tax-advantaged - a mix of HFEA, a trend strategy, and some plain ol' Vanguard funds, so I'm trying to figure out what would be optimal for my taxable.

As I said, I've never engaged in futures contracts myself, so I'm a little nervous about getting started. Do you use IB? I noticed they have "continuous expiration" futures that automatically rolls over itself. I was thinking about going that route. Not sure if the futures margin requirements are cash-only or equity too - I think there was some confusion about that. If cash-only, I'll have to liquidate some of what I have. :? Not the end of the world though, since I have some old stocks that don't really fit into my current strategy.
Hi, if you read the HFEA and similar threads, you will know how to use futures for leverage. I don't want to repeat everything in this thread which would take a long time. But one thing, the "continuous" contracts are just for charts; you cannot buy them.
comeinvest
Posts: 400
Joined: Mon Mar 12, 2012 6:57 pm

Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by comeinvest »

caklim00 wrote: Fri Jun 04, 2021 9:23 pm
comeinvest wrote: Thu Jun 03, 2021 5:30 pm
DMoogle wrote: Thu Jun 03, 2021 9:50 am
comeinvest wrote: Thu Jun 03, 2021 1:16 am Can I ask you what were your assumptions and parameters of your WisdomTree vs. futures comparison? How can the funds be better than futures when the funds use futures themselves plus a fee.
It was really back of the envelope, and I just revisited what I did and realized my assumptions had overaggressive returns and oversimplified. Basically I'm comparing this:

$1,000 exposure via futures portfolio vs. $1,000 NTSX financed with margin

Assumptions:
Rate of return (for both) = 10% (assumed 15% before)
Margin rate = 1.6%
ER = 0.2%
LTCG rate = 15%
STCG rate = 24%
Blended tax rate for futures portfolio = 18.6%
Yield for NTSX = 1%
Time horizon = 20 years.

I assumed futures portfolio would pay the blended tax rate on the gain every year, and the NTSX portfolio would pay the STCG rate on the yearly yield every year, but only the LTCG rate after 20 years. The tax efficiency here is where the value comes from.

Using these assumptions, $1000 in futures portfolio comes out to $4,783, while in NTSX with margin it comes out to $4,322. Margin provides a BIG benefit with the ability to delay LTCG tax until the end, but it looks like it's still not enough to keep up with the lack of interest payments+ER from a futures portfolio.

That said... doing futures myself still makes me kinda nervous, so the simplicity in NTSX might be worth forgoing that route. Dunno yet.

I can post my 5 minute Excel worksheet if you'd like.
Thanks for clarifying. In taxable, the taxes are a big factor. I would make the following comments to your math:
- I personally am hesitant to put any ETF in taxable, as I don't know how long it will survive, and if I still like it in 10, 20, or 30 years, or if it will fit the mainstream or my own investment philosophy at that time - or I will face a tax burden that will annihilate the potential tax advantage. What if government bonds yield negative by then (for example)?
- There was a thread here that discussed the low distribution of NTSX, and I think it had no explanation and it was not clear if that can be extrapolated in the future.
- For these reasons, and for those to who tax-advantaged accounts are available, I would consider putting this strategy in its entirety into tax-advantaged.

A little bit off-topic, but I am running a DIY strategy with futures similar to that of NTSX, with a few little twists. NTSX is maybe a bit rigid: They allocate equal amounts to futures corresponding to government bonds with 2, 5, 7, 10, and 15 year maturities. Look at the current yield curve http://www.worldgovernmentbonds.com/cou ... ed-states/ . 2-year bonds yield ca. 0.15% and have similarly low roll-down. I don't know what exactly the implied financing rate of 2-year treasury futures is, but if it is Libor, then the 2-year treasury futures generate close to zero returns (close to zero carry, to be precise: carry is the return assuming a static yield curve). To top it off, the 2-year treasury yield can pretty much only go up, and *will* go up based on current forward rates, resulting in an almost inevitable loss (not a question "if", but "when") with close to zero upside potential. As a result, I eliminated this part of my treasury futures allocation, until the yield curve is more flat. If you buy NTSX, you are stuck with this component. I'm happy to do my own modified DIY version of NTSX. (I do a few other modifications, higher allocation to equities, among others, as I don't like to be only 90% in equities.) I'm happy to stand corrected if I missed something with my logic.
I did this last year: viewtopic.php?t=304904
I read that thread too back then. I'm trying hard to see how the 2y treasury future can be of any benefit under any realistic scenario with the current yield curve. Would be glad if someone has an idea.
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kevinf
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by kevinf »

It may not be at the CURRENT yield curve, but what about a future one? Should they keep monkeying with the fund every time rates change, or should they just stick to their long-term plan?

What they're doing seems to be working, I don't see a need for them to make speculative changes.
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drumboy256
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by drumboy256 »

calcada wrote: Fri May 21, 2021 1:34 am Why didn't they just make a NTSW for World?

I wonder if they would launch it in the future.
Seriously, are they daft? I would buy that in a heart beat!
Promise is one thing. Fulfilling that promise is quite another. - Sir Alex Ferguson | VTWAX + HFEA + LTT and chill.
Bratbill
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by Bratbill »

Happy with NTSX ...but use HEEM from ishares for EM ......why switch ?
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kevinf
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by kevinf »

The expense ratio?
Bratbill
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Re: WisdomTree NTSX now has siblings NTSI and NTSE launched today

Post by Bratbill »

Bratbill wrote: Sat Jun 05, 2021 9:58 pm Happy with NTSX ...but use HEEM from ishares for EM ......why switch ?
Looks like HEEM is leveraged with US Dollar index ….while the Wisdomtree leverages with US Bonds.
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