3 ETF Management Companies You Should Know About When Trading U.S. Stocks

Hello, tuna(@miyakojimalife_) (^^)

Thank you for always reading my blog♪

Due to the recent investment boom, the number of investment advice channels on YouTube has been increasing.

I think many people see YouTube as a gateway to investing.

In 2007, when I started investing, online brokerage firms were gradually gaining recognition, but it was still a field that required a certain amount of capital to get started.

When it comes to people who invest, they are often wealthy individuals, entrepreneurs, full-time investors, and high-earning salaried workers, so I rarely had the opportunity to meet people who were trading stocks at a young age.

I feel that the government and securities firms deserve much of the credit for increasing the number of young part-time investors to this extent.

As you know, U.S. stocks and index investing play a particularly significant role in the recent stock market boom.

U.S. stocks are attractive because they can be traded starting with just one share and offer the opportunity to invest in world-leading global companies.

Index funds are popular because they allow anyone to achieve market-average returns while diversifying the risk of bankruptcy and dividend cuts.

In this article, I’ll introduce three asset management firms that engage in “U.S. stock and index investing” on a global scale.

Since it’s one of the top three asset management firms in the world, it’s definitely worth knowing about (*’▽’)

What exactly is an ETF?

Since some of you may not be familiar with ETFs, I’ll explain them briefly.

An ETF is,““Exchange-Traded Funds” This is an abbreviation; in Japanese, it is called “listed investment trust.”

Since the mutual funds you often hear about are not publicly traded, securities firms announce the net asset value after trading closes.

ETFs are”Listed”Since these are mutual funds, you can buy and sell them freely during market hours—9:00 a.m. to 3:00 p.m. on weekdays—just as you would with individual stocks in the Japanese market.

For the U.S. market, trading is available during market hours from 11:30 p.m. to 6:00 a.m. Japan Standard Time (10:30 p.m. to 5:00 a.m. during Daylight Saving Time).

I’ve written previous articles about ETFs and mutual funds, so please check those out as well (^^♪)

Are Mutual Funds a Good Choice for Long-Term Investing? The Pros and Cons of Mutual Funds and ETFs

The Difference Between Individual Stocks and ETFs

Individual stocks involve buying and selling shares of specific companies, such as Apple and Google, on an individual basis.

When it comes to stock investing, this method really feels right, doesn’t it?

In contrast, with ETFs, professionals select stocks and create a portfolio designed to track the performance of indices such as the Dow or the S&P 500, and investors buy and sell these products.

Although the term “index” is used here, there are various types of indices—not just stock indices like the Dow or the S&P 500, but also indices for gold, real estate, and more.

The key difference is that individual stocks represent single companies, while ETFs represent a collection of stocks tracking an index (or group).

Now, let’s introduce the operating company♪

Vanguard-Vanguard-

I think many people would name this company first when asked about U.S. stock ETF providers.

Headquartered in Pennsylvania, United States, it is the world’s second-largest asset management firm and the first company to offer index mutual funds to individual investors.

The Pioneer of Index InvestingSo that’s how it is.

John Clifton Bogle, the founder of Vanguard, passed away in 2019, but I believe that without him—and his efforts to provide equal access to low-cost investment opportunities—we as individuals would never have been able to benefit from index funds.

Vanguard, a company that embodies his philosophy, should be one of the best choices for part-time investors.

Vanguard Index ETFs

One of the characteristics of Vanguard’s ETFs is the initial letter of their ticker symbols.

In Japan, companies are classified by numbers, such as Kao (4452), whereas U.S. stocks are classified by letters, such as Apple (AAPL).

Vanguard ETFs are identified by the letter “V” at the beginning of their names (though there are some ETFs to which this does not apply).

It’s kind of like the manga *Initial D* (/▽＼)

Click here to see Vanguard’s index ETFs.

If I had to name one drawback, it would be that in February 2021, Vanguard Investments Japan began the process of winding down its operations, andWithdrawal from JapanI’m doing it ( ；∀；) It seems that in East Asia, they mainly focus on China…

BlackRock-BlackRock-

Headquartered in New York State, United States,The world’s No. 1 asset management firmwill be Black Rock

We also operate under the name Black Rock Japan in Japan (^^)

Its assets under management totaled 9.01 trillion U.S. dollars (Approximately 995 trillion yen) and is the largest in the world! (As of the end of March 2021, based on an exchange rate of 1 dollar = 110.5 yen)

Reference:Black Rock

Considering that Japan’s proposed national budget for 2021 is 106 trillion yen, the size of the fund under management is truly astonishing Σ(ﾟДﾟ)

BlackRock’s Index ETF

BlackRock’s index ETFs are also low-cost, with expense ratios on par with those of Vanguard.

Its flagship product is “iShares,” which boasts approximately 30 percent of the global ETF market share.

State Street—

It is a trust bank headquartered in Boston, Massachusetts, United States.

Following the two companies mentioned earlier,Ranked 3rd in the worldIt boasts a significant amount of assets under management, and in Japan, it operates entities such as State Street Trust Bank and the Tokyo Branch of State Street Bank.

Until around 2018, there was little difference in the assets under management among the three companies, but last year’s capital inflows revealed a stark contrast between them.

State Street seems to be lagging behind the other two companies.

Thanks to inflows into ETFs, the Vanguard Group is expected to surpass BlackRock for the first time since 2013. According to data compiled by Bloomberg, Vanguard has seen a record $194 billion in inflows so far this year. BlackRock, the world’s largest asset manager, saw inflows of $113 billion, while State Street, which ranked third, recorded inflows of $32 billion—a significant gap. BlackRock’s market share is expected to decline for the fifth consecutive year.

Quote:Bloomberg

State Street’s Index ETFs

State Street’s flagship ETFs are the “SPDR” series, which are popular worldwide.

However, the main issue is that the “SPDR S&P 500 ETF” has an expense ratio of 0.0945%, which is higher than the 0.03% expense ratios of ETFs from Vanguard and BlackRock that also aim to track the S&P 500.

Check an ETF’s management fee and its holdings

The three companies featured are among the world’s top three asset management firms, but I imagine they are all unfamiliar to people who are just starting to invest.

The management fee (expense ratio) is very low, which can be attributed in part to the fact that, as an index fund, there isn’t much portfolio rebalancing.

Even among ETFs from the same asset management company, if they are actively managed, there are ETFs with higher management fees.

The ETF you’re planning to buyWhat to Invest InIs that what it says, orWhat is the trust management fee (expense ratio) in percent?That is what matters.

Until just a few years ago, trading commissions for U.S. stocks were high, and it cost about 3,000 yen in commissions to buy a single share.

If you have to pay a commission of 3,000 yen just to buy a single share that costs several thousand yen, you’ll end up losing money on the commission alone.

In reality, no one actually bought as few as one share; the reality was that people were buying shares starting in the hundreds of thousands of yen.

The impact of online brokerage firms, which have drastically reduced fees, is indeed significant.

“The lower the fee, the better.”

This concept also applies to “trust fees,” which are paid to professionals for managing investments.

Be sure to consider management fees when choosing an ETF♪