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Trader Interviews

David Dierking: The DIY Strategist

By Lisamarie Lamb on January 16, 2019

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David Dierking has been in the investment services industry since the mid-1990s, and is a prolific writer – his personal favourite subject is investment strategies, and specifically those using ETFs and mutual funds. A regular contributor to Seeking Alpha, ETFdb.com, ETF Trends and ETF Daily News, he wants people to know that they don’t need to pay exorbitant fees to brokers for unbiased advice; they can, with the right education, do it themselves.

Takeaways

  • David Dierking is passionate about ETFs because they offer everyone the chance to have a diversified portfolio for a low cost
  • They give investors the chance to look at every sector of the market
  • There are downsides to ETFs, and it is crucial that you look into each of them
  • In fact, looking more closely at all aspects of trading is vital
  • Look for brokers and advisors who work on a fixed fee rather than a commission based structure – they will be more likely to have your best interests at heart

David Dierking

Key Lessons

Why is David Dierking so passionate about ETFs? What is the main draw for an investor? It’s because the biggest advantage is that ETFs give everyone the chance to develop a diversified, very low cost portfolio, and when it comes to currency trading tips, these are some of the best. They are simple and straightforward, and will save you a lot of time if you’re a regular investor compared to many other types of investment.

The great thing about ETFs is that you can invest in almost every sector of every market through them, making it more interesting and adding to that diverse portfolio that you’re looking for. Plus you’ll be paying almost nothing for it. If there is any strategy you want to follow, there will probably be an ETF for it too.

There are downsides to ETFs, though, and David Dierking understands them all. Some of them, for example, can be too narrow, so your return might be stunted. Some high have expense ratios, and these should be avoided. Or the risk reward ratio is just no good. But most of the ETF investors are able to stay away from these if they are concentrating on more broad portfolios.

Double-leveraged ETFs can represent a great gain, as can triple-leveraged ETFs, but again, there is a downside to them. It’s important, says David Dierking, that all investors understand both sides of the story. If you time it correctly, you can double, perhaps triple your return but of course that means that if you time it incorrectly, you’ll lose out on a lot of money. These types of ETFs are much more risky than standard ones, plus there tends to be an extra cost associated with them. This means that, when the market doesn’t move, you can still lose money.

David Dierking generally stays away from these; the risk and the cost don’t make the rewards so great.

So is there still value in equities and commodities these days? Perhaps not so much anymore, says David Dierking. Some of the valuations are becoming stretched and numbers just aren’t adding up as they used to. There are so many things going on in the global markets that are affecting these types of investments that it might be better to stay away and try something else.

If that sounds surprising because we’ve got great GDP and low unemployment, it’s when you drill down and look a lot closer that you realise we are due for a slow down in the markets. The closer you look, the more you see that some pockets of industry such as property are beginning to struggle.

Despite this, brokers will still be encouraging people to buy – it is in their interest to do so. It seems as though there is a massive conflict of interest between brokers and investment advisors and their clients because if brokers make commission on what they are selling, they are going to want to sell, despite what the markets might be suggesting.

It might not be in your best interest to buy what you are being directed towards.

Things are changing though. Instead of commission structures like we had in the past, they are taking a percentage of the value of the portfolio instead. That means that when the client’s portfolio increased in value, the broker’s money increases too. Look for fee-based not commission-based advisors and you will have an easier time.

When it comes to cryptocurrencies, David Dierking feels we’ve seen an excess build up over the last few years, and that is now taking its toll, reducing the amount that Bitcoin, for example, is worth. But despite this, and the fact that many people still need a lot of educating on this subject, he is cautiously optimistic. Cryptocurrency now seems to be behaving as it should – as one might expect it to – rather than being such a high flying investment. Now that it is settling down, it is easier to look at it dispassionately and make a sensible decision about investing.

The regulators are still uncomfortable about it though, so what is really going to happen remains to be seen. It can still be a little like the Wild West, so it pays to be careful.

What does David Dierking think defines a broadly diversified investment strategy? To start with, the investor needs to know what their goals are. It will make a difference if you want to invest for long term gain, for example, as you will look at equities in a different light, and perhaps add to them with some precious metals to bulk out your portfolio. You have to understand yourself and what you want. Keep costs low and diversify, and you’re going in the right direction.

Where there’s risk there’s reward, but where there is high reward there is high risk.

www.etffocus.com

 Questions

  1. So why are you so passionate about specifically ETFs?
  2. Double leveraged ETFs: They represent a great gain if the investor is correct and the market moves quickly in their favour – but what’s the downside?
  3. Do you think that there is currently still value to be got from equities – or more so commodities these days?
  4. Do you think we are heading for another downturn?
  5. Do you think there is still a massive conflict of interest between brokers/investment advisors and consumers?
  6. What are your views on crypto-currencies?
  7. How would you definite a broadly diversified investment strategy?
  8. Where can people find out more about you David?
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Lisamarie Lamb

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