Show HN: Pebble Finance – Create a Custom ETF(pebble.finance)
pebble.finance
Show HN: Pebble Finance – Create a Custom ETF
https://pebble.finance/p/f7dc6d732363464487ca5a84a00ce24a
9 comments
This is interesting. I think markets are pretty efficient, so the main selling point IMO is exclusion. I used to wrk in portfolio construction and clients regularly asked for exclusions like "sin" companies (e.g. alcohol), big oil, biotech (when stem cell research was controversial), etc. Clients also wanted a chunk of the portfolio dedicated to cash (say 10%) and to understand how the cash position affected overall returns. They also wanted to know what was the min number of holdings they could use to approximately replicate index returns (mainly to harvest losses and have a large bullpen of replacement equities). In any case, cool idea. I wonder how it stacks up against Wealthfront's exclusion selectors (which I've used for years). Anyway. Cool.
Yeah it's been wild hearing what people wanted to exclude if they could. Even the definition of "sin" stocks varies person to person. Some people are anti-tobacco but perfectly fine with stem cell research.
re: Wealthfront exclusion selectors - this is part of their direct indexing option at higher levels, yes?
re: Wealthfront exclusion selectors - this is part of their direct indexing option at higher levels, yes?
I like the idea. Am I correctly understanding that you don't actually create any ETFs, it's just a tool for constructing a portfolio of individual stocks?
Assuming I've got that right, do you know ballpark how badly the tax inefficiency hurts you relative to ETFs? (assuming a taxable account of course, doesn't matter in a 401k or IRA)
Assuming I've got that right, do you know ballpark how badly the tax inefficiency hurts you relative to ETFs? (assuming a taxable account of course, doesn't matter in a 401k or IRA)
Correct... we're not actually creating an ETF... but we have found that using the term "ETF" makes more sense to more people than "portfolio" or "index".
What we are doing under the hood is... 1) you pick the index 2) kick out companies you don't want 3) we'll construct a portfolio of companies at the new index weights of the rest.
Wrt/ tax efficiency... it's going to depend on if/when you want to rebalance. We are not an RIA (yet) so we are not going to do that automatically today (but make it single click easy and we'll prompt you if/when it makes sense). In comparison to an ETF... if you buy and hold an ETF for 10 years... you'll have a big tax liability at the end from the capital appreciation over 10 years. Practicully speaking... if you direct index through us and rebalance once a year you'll pay smaller/incremental taxes on some things each year (net of gains minus and losses in the index). But no big liability later and you have lots of flexibility over the 10 years.
401k here's are the dream, but not an easy nut to crack. We are looking at supporting TD and IBKR as brokers too and those have IRAs. We currently support Alpaca Markets and their account is taxable (they also have a paper trading account you can use too!).
What we are doing under the hood is... 1) you pick the index 2) kick out companies you don't want 3) we'll construct a portfolio of companies at the new index weights of the rest.
Wrt/ tax efficiency... it's going to depend on if/when you want to rebalance. We are not an RIA (yet) so we are not going to do that automatically today (but make it single click easy and we'll prompt you if/when it makes sense). In comparison to an ETF... if you buy and hold an ETF for 10 years... you'll have a big tax liability at the end from the capital appreciation over 10 years. Practicully speaking... if you direct index through us and rebalance once a year you'll pay smaller/incremental taxes on some things each year (net of gains minus and losses in the index). But no big liability later and you have lots of flexibility over the 10 years.
401k here's are the dream, but not an easy nut to crack. We are looking at supporting TD and IBKR as brokers too and those have IRAs. We currently support Alpaca Markets and their account is taxable (they also have a paper trading account you can use too!).
I’ve been looking for something like this. Will check this out. A few questions:
1. Are you guys registered financial advisors
2. Any plans to support robinhood / schwab outside of alpaca?
3. Do you automatically rebalance portfolio?
4. Any automatic tax loss harvesting
Yay (so were we!)!
re: #1 - We are not currently an RIA... this is current a SAAS atop of your existing broker. As such, we make it easy for you to construct the portfolio and single-click easy to execute the portfolio... you are still executing though. We needed to see if there was interest in this concept before registering. The SEC has a newish "RIA registration for fintech apps" category which we are going to pursue.
re: #2 - Robinhood yes... actually... we have that but turned it off because the API from RH is technically unofficial (and changes!). TD, IBRK and Alpaca have offically supported external APIs. Only Alpaca supports fractional trades in addition to that... so we started with them since this enabled us to run this on smaller account sizes! Schwab/Fidelity/Vanguard and the major brokers don't have offical APIs yet. Big emphasis on "yet".
re: #3 - automatic rebalance. Because we are not an RIA, we need you to execute the rebalance. So, until we are... we'll tell you when it's time and make it single-click easy. After becoming an RIA... yep, can make that happen.
re: #4 - TLH... yeah, we can... but its not the magic bullet that the marketing pitches make you think it is. Long convo there :) But implementation wise, yes we could add a TLH option.
re: #1 - We are not currently an RIA... this is current a SAAS atop of your existing broker. As such, we make it easy for you to construct the portfolio and single-click easy to execute the portfolio... you are still executing though. We needed to see if there was interest in this concept before registering. The SEC has a newish "RIA registration for fintech apps" category which we are going to pursue.
re: #2 - Robinhood yes... actually... we have that but turned it off because the API from RH is technically unofficial (and changes!). TD, IBRK and Alpaca have offically supported external APIs. Only Alpaca supports fractional trades in addition to that... so we started with them since this enabled us to run this on smaller account sizes! Schwab/Fidelity/Vanguard and the major brokers don't have offical APIs yet. Big emphasis on "yet".
re: #3 - automatic rebalance. Because we are not an RIA, we need you to execute the rebalance. So, until we are... we'll tell you when it's time and make it single-click easy. After becoming an RIA... yep, can make that happen.
re: #4 - TLH... yeah, we can... but its not the magic bullet that the marketing pitches make you think it is. Long convo there :) But implementation wise, yes we could add a TLH option.
This is interesting. Have you seen quantconnect.com?
I get where you're going with the ETF thing, but feels like you're trying to make a faster horse, when the real money makers have already got cars.
I get where you're going with the ETF thing, but feels like you're trying to make a faster horse, when the real money makers have already got cars.
re: quantconnect - Actually yeah... we have come across them. TLDR; they are targeting a different persona. But as we talk to more and more people we are learning more and more about what people want... so maybe we'll converge some day!
Right now... we've found interesting ways to engage general retail investors (ie.. not your typical HN crowd) around the idea of personalizing an investment. Some people are performance driven. Some people are values driven. Each has different definitions of what those mean. Everyone is a snowflake... it's wild.
One person had a really bad flight on United and asked... "hey could I cut them out of my portfolio". My thought was... is that a sound investing descion; no... is it going to matter in the long run; no... is it going to make her happy right now; yes. So sure... S&P 500 minus UAL... why not.
All being said... I think there is a market for democratizing "wall street algos". Quantconnect (which reminded me of Quantopian) is allowing you to create/backtest new strats. That's cool... but limits the audience to the quants and engineering crowds. Could it be made easier for the broader spectrum of retail... hmmm.
Right now... we've found interesting ways to engage general retail investors (ie.. not your typical HN crowd) around the idea of personalizing an investment. Some people are performance driven. Some people are values driven. Each has different definitions of what those mean. Everyone is a snowflake... it's wild.
One person had a really bad flight on United and asked... "hey could I cut them out of my portfolio". My thought was... is that a sound investing descion; no... is it going to matter in the long run; no... is it going to make her happy right now; yes. So sure... S&P 500 minus UAL... why not.
All being said... I think there is a market for democratizing "wall street algos". Quantconnect (which reminded me of Quantopian) is allowing you to create/backtest new strats. That's cool... but limits the audience to the quants and engineering crowds. Could it be made easier for the broader spectrum of retail... hmmm.
I shared one of my portfolios to create that link here.
What I did... S&P 500 minus:
* TSLA - love the car, love Elon, IMO stock is overvalued
* ATVI - just cut them out since last week (obv reasons)
* SPGI - wife works there and we get a lot of stock (so just don't want even more exposure)
* FB - just putting them in the ice box for a little bit.. might add back
So I told the app to cut out those companies and within a few seconds... boom :)
What have we learned in talking to people (and would love feedback on this too).
* It's easier to think of companies that will underperform, than over perform.
* ESG is a creating a lot of buzz... but the definition of ESG is subjective and people like control.
* Especially in tech... it's pretty easy to get single name overexposure and now you can diversify w/o further exposure.
Direct links to app here (or visit the share page).
IOS -> https://apps.apple.com/ca/app/pebble-finance/id1553494910
Android -> https://play.google.com/store/apps/details?id=finance.pebble...