WisdomTree NTSX now has siblings NTSI and NTSE launched today

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
jhsu802701
Posts: 332
Joined: Fri Apr 03, 2020 2:42 pm

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

Post by jhsu802701 »

stormcrow wrote: Thu Jun 03, 2021 10:46 am
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.
I didn't realize that NTSX, NTSI, and NTSE were leveraged. There's even MORE reason to avoid them. If the values of the stocks and bonds drop enough, the fund could get wiped out, and shareholders would miss out on the rebound. This game over scenario is a deal breaker for me.

The only people with any business owning these funds are speculators.
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
DMoogle
Posts: 221
Joined: Sat Oct 31, 2020 10:24 pm

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

Post by DMoogle »

jhsu802701 wrote: Mon Jun 14, 2021 12:09 pmI didn't realize that NTSX, NTSI, and NTSE were leveraged. There's even MORE reason to avoid them. If the values of the stocks and bonds drop enough, the fund could get wiped out, and shareholders would miss out on the rebound. This game over scenario is a deal breaker for me.

The only people with any business owning these funds are speculators.
This is a fundamental lack of understanding of the risk associated with the underlying assets. I would argue that holding NTSX is substantially less risky than VOO. I mean... similar return with lower risk is kind of the point of the fund. Just because something has leverage doesn't inherently make it riskier. If it actually got wiped out, then there are probably bigger issues at hand (like... an apocalypse maybe?).

Extreme example: what's riskier (from a volatility, range of outcomes, and max drawdown POV), a S&P 500 fund like VOO or a 101% leveraged money market fund like VMFXX? Certainly VOO. NTSX essentially takes a balanced treasury+equity portfolio, which has better risk-adjusted returns relative to a 100% equity portfolio, and leverages it up with the objective of getting similar returns to an all-equity portfolio, but with superior risk characteristics. It's a very simple idea, and relatively easy to replicate on your own (which explains the relatively low expense ratio).
Semantics
Posts: 302
Joined: Tue Mar 10, 2020 1:42 pm

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

Post by Semantics »

jhsu802701 wrote: Mon Jun 14, 2021 12:09 pm
stormcrow wrote: Thu Jun 03, 2021 10:46 am
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.
I didn't realize that NTSX, NTSI, and NTSE were leveraged. There's even MORE reason to avoid them. If the values of the stocks and bonds drop enough, the fund could get wiped out, and shareholders would miss out on the rebound. This game over scenario is a deal breaker for me.

The only people with any business owning these funds are speculators.
This is just totally wrong for all practical intents and purposes. They rebalance any time the allocation deviates from the 60/40 ratio by 5%. In order for the fund to be wiped out, both the S&P 500 and bonds would have to drop to zero, in which case the most Bogleheady of Boglehead portfolios is also a game over scenario.
HawkeyePierce
Posts: 1861
Joined: Tue Mar 05, 2019 10:29 pm
Location: Colorado

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

Post by HawkeyePierce »

jhsu802701 wrote: Mon Jun 14, 2021 12:09 pm
stormcrow wrote: Thu Jun 03, 2021 10:46 am
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.
I didn't realize that NTSX, NTSI, and NTSE were leveraged. There's even MORE reason to avoid them. If the values of the stocks and bonds drop enough, the fund could get wiped out, and shareholders would miss out on the rebound. This game over scenario is a deal breaker for me.

The only people with any business owning these funds are speculators.
The equity portion of the fund is unlevered, it can only go to zero if the S&P500 goes to zero.

The Treasury futures portion is secured by cash, not the equity side of the fund, so even if those futures went to zero the fund would not be wiped out, only the 10% cash allocation.

The chances of NTSX going to zero is... zero.
User avatar
crystalbank
Posts: 449
Joined: Wed Nov 01, 2017 12:21 am

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

Post by crystalbank »

jhsu802701 wrote: Mon Jun 14, 2021 12:09 pm

I didn't realize that NTSX, NTSI, and NTSE were leveraged. There's even MORE reason to avoid them. If the values of the stocks and bonds drop enough, the fund could get wiped out, and shareholders would miss out on the rebound. This game over scenario is a deal breaker for me.

The only people with any business owning these funds are speculators.
This is a gross mischaracterization. It is definitely not a leveraged ETF (like UPRO) and there is no way the fund will be wiped out unless both SP500 and the UST market both get wiped out. There are scenarios where NTSX might lag significantly compared to a pure total market fund but that's about it. I suggest you read the prospectus before coming to conclusions.
caklim00
Posts: 2389
Joined: Mon May 26, 2008 10:09 am

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

Post by caklim00 »

NTSE still has hardly any volume. Dealbreaker for me.
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 »

caklim00 wrote: Mon Jun 14, 2021 4:56 pm NTSE still has hardly any volume. Dealbreaker for me.
NTSE does seem like the weakest choice of the 3. EM tends to be the least correlated with the treasury ladders, and the AUM is quite low.
I flip flopped on it vs VWO quite a bit.
badger42
Posts: 573
Joined: Thu Apr 09, 2015 9:01 am

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

Post by badger42 »

I think these funds could be interesting, but not in the current environment.

In the current environment (with 10yr yields around 1.5%) I have absolutely no desire for more nominal treasury exposure. If rates were closer to historical norms I'd totally jump onboard.
User avatar
kevinf
Posts: 419
Joined: Mon Aug 05, 2019 11:35 pm

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

Post by kevinf »

badger42 wrote: Wed Jun 16, 2021 10:01 am I think these funds could be interesting, but not in the current environment.

In the current environment (with 10yr yields around 1.5%) I have absolutely no desire for more nominal treasury exposure. If rates were closer to historical norms I'd totally jump onboard.
There is very little reason to be concerned about the yield of the bond side of this fund.

The treasurys are being used as rebalancing ballast in the fund, so we care more about them being largely uncorrelated and less about their yield. The fund is already 90% stocks as far as yield is concerned, the fact that we can ALSO have treasury yield on top is simply a bonus.
DMoogle
Posts: 221
Joined: Sat Oct 31, 2020 10:24 pm

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

Post by DMoogle »

Today's the second time I've put in an order for 1k shares of NTSI using IB's MidPrice methodology and haven't been able to fill any. :?
badger42
Posts: 573
Joined: Thu Apr 09, 2015 9:01 am

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

Post by badger42 »

kevinf wrote: Wed Jun 16, 2021 10:20 am
badger42 wrote: Wed Jun 16, 2021 10:01 am I think these funds could be interesting, but not in the current environment.

In the current environment (with 10yr yields around 1.5%) I have absolutely no desire for more nominal treasury exposure. If rates were closer to historical norms I'd totally jump onboard.
There is very little reason to be concerned about the yield of the bond side of this fund.

The treasurys are being used as rebalancing ballast in the fund, so we care more about them being largely uncorrelated and less about their yield. The fund is already 90% stocks as far as yield is concerned, the fact that we can ALSO have treasury yield on top is simply a bonus.
It's not 10% treasuries, it's 60% treasuries through leverage. Let's say the treasuries have an average duration of 7yr (fund docs say 7-7.5yr) and overall rates went up 1% - that 60% equivalent treasuries would lose about 7%, you'd see an overall loss of about 4.2% in your holdings. If rates went up by 3% (not implausible given current inflation numbers) you'd see about a 12.6% loss. (I would expect exposure >10% due to ongoing rebalancing)

It's not the end of the world, but it's a likely drag on equity returns.
DMoogle
Posts: 221
Joined: Sat Oct 31, 2020 10:24 pm

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

Post by DMoogle »

badger42 wrote: Wed Jun 16, 2021 2:50 pmIt's not 10% treasuries, it's 60% treasuries through leverage. Let's say the treasuries have an average duration of 7yr (fund docs say 7-7.5yr) and overall rates went up 1% - that 60% equivalent treasuries would lose about 7%, you'd see an overall loss of about 4.2% in your holdings. If rates went up by 3% (not implausible given current inflation numbers) you'd see about a 12.6% loss. (I would expect exposure >10% due to ongoing rebalancing)

It's not the end of the world, but it's a likely drag on equity returns.
This is a fair perspective and one I've heard frequently around here. Question though: what kind of asset allocation strategy would you (or anyone else concerned about rising yields) recommend someone who is already in retirement? The conventional wisdom is to increase allocation to bonds as one gets older. Do you disagree with that strategy, or do you just think that the risk-adjusted returns will be lower for a 60/40 portfolio than a 100% equity portfolio?
badger42
Posts: 573
Joined: Thu Apr 09, 2015 9:01 am

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

Post by badger42 »

DMoogle wrote: Wed Jun 16, 2021 3:02 pm
badger42 wrote: Wed Jun 16, 2021 2:50 pmIt's not 10% treasuries, it's 60% treasuries through leverage. Let's say the treasuries have an average duration of 7yr (fund docs say 7-7.5yr) and overall rates went up 1% - that 60% equivalent treasuries would lose about 7%, you'd see an overall loss of about 4.2% in your holdings. If rates went up by 3% (not implausible given current inflation numbers) you'd see about a 12.6% loss. (I would expect exposure >10% due to ongoing rebalancing)

It's not the end of the world, but it's a likely drag on equity returns.
This is a fair perspective and one I've heard frequently around here. Question though: what kind of asset allocation strategy would you (or anyone else concerned about rising yields) recommend someone who is already in retirement? The conventional wisdom is to increase allocation to bonds as one gets older. Do you disagree with that strategy, or do you just think that the risk-adjusted returns will be lower for a 60/40 portfolio than a 100% equity portfolio?
I'm still a few years from some flavor of FIRE but if you're looking for conservative options TIPS at least limit the negative real yield you're going to get.

Our current allocation targets (not a specific recommendation for anybody else) are
63% equity (middle of bands is 63.25% US, 27.25% developed, 7.5% emerging, 2% frontier, ~20% SCV tilt for domestic and developed)
18.5% real estate (mix of private equity, REITs, and a bit of pref)
15% bonds (equal parts TIPs, high yield, nominal treasury)
3.5% commodity (mix of actual commodities eg IAU, mining eg RING, PICK, integrated eg WY)

More than 15% bonds seems wasteful in the current interest rate environment. If I were retired and worried about volatility I'd probably shift some assets into a TIPS ladder (liability matching).
wenchleaf
Posts: 12
Joined: Thu Nov 26, 2020 4:56 pm

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

Post by wenchleaf »

As I understand it, the equity portions of these three track VOO, VTMGX, and VEMAX respectively. Where is the US Mid-Small cap version?
muffins14
Posts: 634
Joined: Wed Oct 26, 2016 4:14 am

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

Post by muffins14 »

DMoogle wrote: Wed Jun 16, 2021 12:10 pm Today's the second time I've put in an order for 1k shares of NTSI using IB's MidPrice methodology and haven't been able to fill any. :?
Why not just place market orders for groups of 100 or 200?
Post Reply