The STW (ASX 200 ETF) went through the GFC pretty much without issue - that was a slow burn sell-off - this issue will only get tested in a crash, which is very low odds. It is always the unexpected (not being able to sell in this case) that will ruin a good theory. Of more interest to me is the bit in this article about why passive investment has grown - it is marketed as the individual choosing to do so because the product is good, but clearly the wholesale growth has come from the industry choosing to do so because it makes their life easier, so they promote it. In researching this article I talked to some mates in New York, one a broker who said "Let me guess, Australia, you're still doing individual share trades in individual stocks...you poor things". ETFs and passive funds are the 'way out' for brokers and they have taken to it in their droves.

On The problem with ETFs -

One of those is Wood Mackenzie's equity desk in London circa 1985 and the other is Panmure Gordon in London circa 1992

On Ten investment rules -

I completely agree - something is wrong if interest rates are dropping to 0.75% by the end of the year, something that is not commensurate with price inflation, a growing economy and a bouyant housing market. But as an equity focused fund manager it is not the value of my house, or the housing market exposed stocks I'd worry about - if growth becomes the issue - its the growth stocks.

On The residential property market has bottomed (and how to play it) -

A reply to the zero returns contention: Even with the dividends the real return from the stock market is significantly lower than an index would suggest. Lets say the long term return on the All Ords is around 6% plus dividends of 4% - that makes a generous 10% - take off a conservative inflation rate of 4% over the long term (its higher) - then you are working on 6% compound - go through a financial planner (1% - used to be 2% - and even if you don't use a financial planner you will still have your own costs of time spent managing your investments). Then you or they buy managed funds (1.5% - used to be 2%) - now you are playing with a 3.5% real return. Then pay any of the following - a spread on buying managed funds, commission on trades, the index fudge (survivorship) that eat into the 3.5% and you are getting close to a zero sum game. Compounding is the eighth wonder of the world - but not if you don''t compound, retirees don't, they spend it. If you are entitled to but lose the cash refund of franking credits then things get even worse. All the averages you hear quoted are from product selling institutions using an index that doesn't have management costs, dealing costs, that perfectly compounds dividends, that perfectly gets rid of and acquires the index constituents as they change, that has no employees, offices, water-coolers or heating bills. All this renders an index return an utter fantasy, which is why most fund managers underperform after real costs - not because they are useless as the marketing of zero-value add passive funds projects. Hopefully you begin to understand how you have to do better than invest in the average in the long term. The 'fantastic' (fantasy) returns on indices over-inflate reality which is why they are used ad nauseam to sell financial products. They are trying to give you the impression there is a party going on and it is easy to take advantage off it by buying their products. But the real return will be significantly less than the headline index return. If you are a passive investor then OK, but do not believe the 9.1%, understand that the next ten years will deliver ten completely unrelated returns each year and the average is a statistic not an expectation, and cut your costs to the bone or you'll go nowhere. For the rest of us we will get on with picking better quality stocks, avoiding rubbish stocks and timing the market. If an adviser or a fund manager doesn't bother to do that they are an administrator only, and should be paid accordingly. Meanwhile there are some fantastic engaged individuals in the advice and funds management industry that live and die on their performance, love what they do and succeed at it. I'd prefer to invest in them than some benign index that relies on a lie to sell itself. Just saying...

On Padley: The problem with "buy and hold" -

To Lorraine, Bob, and David - You're right, my bad (was quoting a news article) - the original speech is on this link from Chris Bowen - https://www.chrisbowen.net/media-releases/a-fairer-tax-system-dividend-imputation-reform/ - it says “The policy will apply from 1 July 2019, which means it will only affect future earnings and franked dividends that start flowing in following financial year.” – I don’t know if that timetable has been extended or qualified since. Someone needs to ring Bill!

On What to do about franking credits -

Rising rates is in the price - and for those who didn't live through the 1990s, 17% is a high interest rate, not 3.5% by the end of 2019 (!) - interest rates are going nowhere significant - if they did it would matter, but they aren't likely to.

On The Collins Class Rule -

James - I should have put up the small caps relative to the ASX 200 against the VIX - it would make the point better - small caps outperform on a relative basis when the market is more 'comfortable' . The small caps are flying relative to the market now - as Morgan Stanley point out...their PE relative to the large caps is a a premium only seen three times since 2000. Arguments aside - I've just take some (premature?) small cap profits because when this turns...no-one is going to be able to get out. Finger on trigger.

On Small Caps Flying -