Are You Trading Away Your Returns?

So I used to trade foreign exchange, but we've all kind of traded foreign exchange, because let's say you're taking a vacation, you fly over to Singapore, you get off the airplane, you go to the currency exchange counter, right? We've all been there. You look at it and you say, "Since when is the Sing, like, stronger than the dollar?" Like, when did that happen? Well, it didn't, it's because the spreads are very wide. Why are the spreads so wide? Why can they charge you so much for those Sing dollars? 'Cause they got you on time. What are you gonna do, you're gonna walk around without money for two days? I don't think so. You need it now, right? Even two hours, most people aren't gonna wait, and they know what you need. You need Sing dollars. You're not gonna buy euro and then walk around the streets. It's gonna be useless to you, so they've got you. Yeah. And you sacrifice in price. And Jake, like you said, there's lots of examples all throughout our lives where we see that, same thing in trading, so it's an important framework to have just generally. Welcome to "The Informed Investor," where we break down the latest financial headlines, bringing in research and insights to help you separate the news from the noise. Buy low, sell high? Today, we're talking boiler rooms and trading costs. Thank you for joining "The Informed Investor." I'm Mark Gochnour, joined by Jake DeKinder, head of Client Communications, and Rob Harvey, co-head of Product Specialists. That's right. Good to have you back on the show. Good to be here, man. Thanks for having me. All right. Buy low, sell high. All right. Trading, I got some headlines for you, Rob. Okay. By the way, Jake, you have your pen, no paper? That's right. You have nothing, I've got my notes, so either I'm the only one that prepares for this or you guys are so smart- We're gonna find out. It's just all right up here, and I'm not as smart as you guys. We'll see. I think it's the latter. Okay. It's like "Office Space." People ask me all the time, like, "So what do you do here?" I was like, "I don't know." I got a pen, though. I got a pen. Oh, you got a pen? I'm ready. Headline: "Investing Versus Trading, What's The Difference?" "Your Active ETF is Cheap, But Your Trade Might Not Be." Mm, I like that one. So that's a good one. I like that one. Because it opens a door for trading costs and how important that is in terms of your return. It can be very expensive Right. For the investor, depending. Yeah, that's right. I like how it's phrased, too, trading costs, right? And we have to think about trading that way, which is anytime you go to market, you're gonna pay. You're gonna pay some explicit cost, you're gonna pay some implicit costs, we're gonna kind of unpack what that is, but I think we need to address upfront is that when you trade, you will eat into your returns, right? Sometimes it's gonna work out for you, sometimes it isn't, but you're kind of going against some costs that, you know, could very well impact your returns in a negative way. And that's not just on the individual stock side. Again, you read an ETF one, and later on, we can talk a little bit about ETFs, but that surprises people as well. I mean, how often do we hear it be like, "Oh, it's free trading ETFs," be like, "Yeah, but there's a bid-ask spread." And people are like, "Yeah, but it's free," I'd be like, "Yeah, but there's a bid," it's like you just are, like, talking to a wall there or something. Yup. I love this, by the way. So tell me how often you've seen this, right? You're watching CNBC, there's a commercial, there's two guys on there, maybe they're at their barbecue, maybe they just wrapped up a game of badminton. They're talking to one another, and one of them says to the other one, he says, "Hey, hey, Chaz, have you explored trading options on precious metal futures?" And the other guy's like, "Ah, no," and he's kind of embarrassed about it, And then he's like, "Dude, what are you doing?" Like, "Do you even care about retirement?" Like, "Get in there, take charge of your financial freedom. Take charge of your future," why? Even though it's free, right, and the platform will tell you we're a very low cost, there's still costs associated with that. So you always have to think about who's making money off of this, right? 'Cause somebody is. Yeah, no one's that nice, right? Nothing's free. No. But your objective trading is to minimize cost as much as you possibly can, Right. And there's definitely things you can do to try to do that. Right, right. Exactly. Hey, real quick, and I kind of got ahead of us there. I said, bid-ask spread. Break it down for me quickly. Great, so when you go to buy anything, an equity, a bond, commodity, you're gonna have a bid-ask spread. So the bid is gonna be the lower price of those two, and the ask is gonna be the higher, right? So they won't be exactly on top of one another. Even for the most liquid securities in the market, usually, you'll see, like, a penny difference between the bid and the ask spread of major, major names in the US. Like an Apple. Like an Apple, for example, right? Microsoft or something. And so you'd obviously like to buy at the bid, buy low, sell high, we talked about it at the beginning, but it's very difficult to do. Usually, the broker is gonna be buying at the bid and selling it to you at the ask. So part of what you have to think about is the spread, but then also part of what you think about is how do you execute either inside the spread or as close to the bid as you can? There's some things you have to think about, and we'll talk about what they are. I always get those confused, the bid-ask. All I know is if I'm buying, I have to pay the higher price. If I'm selling, I get the lower price. Can I tell you what's helpful? Bank buys bid, or your broker buys bid, either one that you wanna think about, and then you think, "Okay, they're probably doing that 'cause they want to do that, right? That's a good thing for them." That helps you keep it straight. Okay, so that broker, they're providing a service, so they get paid for that, right? They make that spread, that difference between the bid-ask spread. Yep. But let's go back to what you said there on there's an implicit and an explicit cost. Yes. There's also a commission that you may or not be paying. Sometimes you pay a standard commission when you go do a trade, sometimes it comes in the form of a bid-ask spread. Right, right. Is that what you meant by sort of the implicit cost? Yes, well, and the implicit cost is a couple of things. So the implicit cost could be moving markets by your trade, right? No one says you have to execute inside the bid-ask spread. You could do a lot worse than that. So if you have a huge amount of volume coming to market, if you're demanding liquidity, you can actually go beyond the bid-ask spread in a bad way. You can also, you know, cross the spread, you'd like to buy at the bid, but maybe you end up buying at the ask, also not great. Those are implicit costs. Explicit costs are things you're gonna pay pretty much every time you go to market. You gotta pay your broker, you gotta pay your custodian, right? There's exchange fees associated with that, and we can't ignore that part of this either, because it sounds like, eh, you know, like you were saying, Jake, like, there's good deals out there from explicit costs. I wanna talk about this for a second, because it actually can be difficult to determine how your asset manager is paying, but there's some interesting case studies we can look at, particularly in Canada, because in Canada, managers are required to disclose what their trading expense ratio is, and what their trading expense ratio is is exclusively explicit costs, commissions. How much do they pay? And you might think, "Eh, you know, maybe it's free? It's pretty cheap," or you know, what have you. I've seen managers with trading expense ratios above 50 basis points. When you think about the total expense ratio of what we invest in, oftentimes much lower than that. So your trading costs, even just from the explicit perspective, matter a lot. Well, you've been a portfolio manager in our London office, right? Yeah. You managed portfolios all around the world, here in the US, as well, so I mean, it's a fair comment. Sometimes the trading cost is more expensive than the expense ratio of a particular fund. Can be, can be. So part of it depends on how careful are you when you go to market, but then also part of it is how often do you go to market, right? The more you trade, the more expense you're gonna incur. So you have to look at the turnover, but also what's the strategy of the manager when they go to market? That's important, too. I mean, we should also note, too, that this stuff is not consistent through time. So whether it's time of day, whether it's a time of year, whether it's major events that are going on, maybe it's just individual securities are gonna have different volumes because of how big they are, how large they are, that there's a lot that really starts to go into those potential costs that you could be paying. And again, I don't think a lot of people realize that whether it's at the individual, you're an investor and you're going, and you're trading stocks or ETFs yourself, or whether you're a manager, an asset manager, and you're doing this stuff. Like, you really have to understand that, 'cause at the end of the day, there's only one spot where all of that comes from, and it's the return you take home as an investor. That's right. And if you're not smart about what you do, you're going to eat into the returns. Yeah, absolutely, and I think that's a good way to think about trading costs, is your portfolio is doing, hopefully, what you want it to, right? You've done your diligence on the manager. How do you protect as much as that as you can? Because there are ways to eat away at that. So you mentioned trading costs, the cost of buy or selling security. Yeah. Then you mentioned turnover, how much you're buying and selling within a particular mutual fund or ETF, and Jake, we've done some work around that here at Dimensional, looking at turnover rates, and then what does that mean in return? So the general relationship. Yeah, I mean, "The Fund Landscape" is a really good piece that's put out by Dimensional, and basically, we go out and we look and say, "Okay, let's take every fund that is a non-indexed fund, and sort of say, every fund that's available to a US investor, and let's group it by quartiles around turnover." Basically, how much buying and selling is going on in there. And it's pretty simple when you look at the visual. Simply, the more turnover, the lower percent of managers that outperform their prospectus benchmark over time, and that's kind of the point that I was making of a high turnover can potentially be costly. There's only one spot it comes from, which is the return you take home. So all else equal, a higher turnover strategy tends to have lower outperformance versus a benchmark. It's pretty straightforward. It's very straightforward, 'cause you're just putting yourself further behind the eight ball, right? That's just more of a hurdle you have to clear, but I do wanna point this out, 'cause you're right, and it's linear, too, right? The lower you do tends to be the better you do, like, in terms of turnover. So some people might be thinking, "Okay, well," you know, maybe they're in an index fund, right? So maybe they're in the Russell 3000. So if you start the year in the Russell 3000, and you want to end the year in the Russell 3000, how much turnover do you have to do throughout the year? Some people will say zero, right? You start with the Russell 3000, you end with the Russell 3000, but actually because of dividends, because of cash you get from corporate actions, for example, constituents are changing, your turnover won't be zero, so you can't ever get to zero. You can't just say, "Ah, I won't worry about it," right? You have to think about it, and have to have a strategy for it. Lower is better, but you know, thinking about how you approach it is important. So one thing that I think about often is my grandma never learned how to drive on highways, couldn't figure out how to merge. And for her, when she would just drive around in Chicago, like, she could get in and around her neighborhood pretty easily. If you want to go anywhere else, to another neighborhood in Chicago, you gotta get on the expressway, and if you don't know how to do that, your experience is gonna be very painful. So you can't just close your eyes and say, "Eh, I just won't do it." Same thing with turnover in a portfolio. You have to learn how to trade effectively, otherwise your experience is gonna be worse. Keeping it lower is better, but you have to learn how to do it. And it's a good point, you have to learn how to do it, 'cause otherwise, think about that. So I buy a portfolio on day one, and I'm not comfortable with any type of turnover. What's gonna likely happen to my strategy over time? It's gonna move kind of off-target, right? Away, yeah. Because security prices change and all of those. So it's sort of a requirement of you have to be able to trade the portfolio to keep it focused on what the objectives are. Right. So when you do it, you have to know how to do it intelligently. Exactly, yeah. Well, so for example, you're a small cap portfolio, you're buying small stocks, some of them do well, right? They get bigger, higher market cap. Price goes up. They don't fit the strategy anymore, so you gotta sell 'em off, and go buy small. Right. That's an example of what you're talking about there. That's what I'm talking about. But then you talk about the market, even a buy-and-hold market strategy, like your Russell 3000. Right. You still have to go do some buying and selling for like you said there. Yeah, just reinvesting- Appropriate actions, Some of that cash. dividends, something like that, right? Right, and hopefully, you have cash coming into the portfolio you have to reinvest. So yeah, those are important considerations. So what are some of the things you want to think about? What are some of the things you wanna prioritize when you actually go buy and sell? Yeah. And here, we've been talking equities. We'll get into bonds here in a minute, a little bit later as well, which is even more important to trade effectively. Yeah, and the framework that we use applies to fixed income as well as it does to equities, but we like to think in triangles here at Dimensional, so let's talk about PQT. You and I love talking about PQT. It's important for people to have an understanding that the priority might not be what you think it is for different managers. So it's important to assess what's being prioritized and what's kind of being left behind. So PQT, what is it? Price, quantity, and time. If you've ever heard the expression, "Good, fast, cheap, you can't get all three, pick two," same thing applies to trading. You can't get what you want when you want at the price you want it. You have to choose what you wanna prioritize. So do you care about your execution price? Do you care about your quantity, meaning not just how much but the certain names, like if you're really attached to a certain name, getting that in your portfolio, that's quantity. And then time, how fast do you want to execute? What does your time horizon look like? And so these variables really can change depending on which manager you're talking to or thinking about, you know, what is most important to them. And you would think that it's price, but oftentimes it isn't, right? There's other considerations that might be more important for managers other than just getting a good execution price. So walk through it, so give me motivation. Give me broad groups of managers, and give me different motivations they might have. Okay, so let's talk about index. I've already mentioned sort of index managers at the beginning. Let's talk about the incentives of an index manager, what are they thinking about? How do we measure whether or not your index fund is doing a good job? What's the key metric that we use in the industry? Tracking error. Tracking error. Yeah, are you looking like the benchmark? Are you looking like the benchmark, right? That's what it's saying. So you don't wanna outperform, you don't wanna underperform, you wanna perform exactly in line. So when you think about PQT in that format, what's most important for you as an index fund manager? Match the index. So that means whatever the index does, you do it. Your quantity is set. If an index is adding a name, you're buying that name. If an index is deleting a name, you're selling that name. You're set there, right? Q has to be protected. T also has to be protected, time. When an index does something, if you wait two or three days to make that same move, you're gonna incur tracking error. You don't want tracking error. So try to match it as closely as you possibly can down to the minute oftentimes is what we'll see. Just a couple minutes in the market is where index funds are interacting to try to match that closing price where an index is gonna be adding a security. So if you're set on quantity and you're set on time, then you necessarily have to give up price, but that's not that big of a deal for an index fund, is it? Because if the index, you know, marks it at a higher add, and add at a higher price, and the index fund buys it at a higher price, it's no problem. You're tracking your zero. So as long as they're with one another for that higher price, so that's, I think, something important to consider with an index fund is that the incentives aren't to necessarily get a better price. Quantity and time come first. Now, let's talk about active managers, also sort of through that same framework. So what do active managers do? They do fundamental analysis, most of the time, you know, when you think about traditional stock picking managers. So they have a name that they like. If you really like Ford, as an active manager, can you go out and buy GM instead? No. No, my research has been on Ford, right? Your research is on Ford. And probably the reason you like Ford is you don't like GM, right? So you're doing this sort of fundamental analysis, you're looking at your peers, so you're kind of locked into that name. You don't have a lot of flexibility, and you're also probably moving a lot of money. Active managers tend to have higher concentration in their portfolio, so there's more to move. Locked into quantity. Time, and I think, Mark, this is really important, we talk about this, too, quite a bit. Time is of the essence as an active manager. If you have information as an active manager that nobody else will ever have, it's not that useful to you. What you want is to have the market realize what you think you know and have the price adjust. You just wanna get there first, so time is of the essence. You have to move before everybody else figures out what you think you know, and you're counting on that. So you gotta move quick, that's time set. Price therefore gets left behind a little bit, and you're okay with a slightly higher price as long as it's below your price target, for example. So you will give up a little price there as long as you still think you can make money off of it. So again, price kind of gets sacrificed in that model. So a strong manager hopefully will have the flexibility to say, "Hey, I can be a little bit flexible around quantity and time to maximize the price that I'm getting." And by that, we mean getting a good price, which is you're paying the lowest price possible- That's right. On the buy side, or you're getting the highest price on the sell side. The key word that you said there is what my chiropractor tells me all the time. Flexibility is critical, right? And if you don't have flexibility in your process, you can't, or it's much more difficult, to obtain a better price, right? So that's what you should be thinking about protecting as a manager. I mean, think about anything you want to go and buy, right? And if you're flexible around when you buy it and how much you buy it, excuse me, you're probably gonna get a little bit better price. Concert tickets, airline tickets, automobiles. Totally. I mean, there's just so many things. Just logically think on trying to go and purchase something and say, "I absolutely have to have this one, and I absolutely have to have it right now." Yep. And so- I mean? We've all had this experience, too. So I used to trade foreign exchange, but we've all kind of traded foreign exchange, because let's say you're taking a vacation, you fly over to Singapore, you get off the airplane, you go to the currency exchange counter, right? We've all been there. You look at it and you say, "Since when is the Sing, like, stronger than the dollar, right?" "Like, when did that happen?" Well, it didn't, it's because the spreads are very wide. Why are the spreads so wide? Why can they charge you so much for those Sing dollars? 'Cause they got you on time. What are you gonna do, you're gonna, you know, walk around without money for two days? I don't think so. You need it now, right? Even two hours, most people aren't gonna wait, and they know what you need. You need Sing dollars. You're not gonna buy euro and then walk around the street. It's gonna be useless to you, so they've got you. Yeah. And you sacrifice in price. And Jake, like you said, there's lots of examples all throughout our lives where we see that, same thing in trading, so it's an important framework to have just generally. Well, also, too, I think there's a little bit of lack of information sometimes in your example, as well, right? Like, do people really know what the exchange rate should be? They're like, "No, I just saw it on a board and I went and did it, and I needed that service." Right, right. And I think there's a little bit of that element, too, when people go and access markets, of do I really understand kind of all of the nuances and have all of the information before I go into it? Or am I going to it a little bit blind? And you mentioned bonds, and I think that's a market where you really have to understand what you're doing if you're going and buying and selling individual bonds, because they don't trade on an exchange like stocks. So those spreads for bonds in terms of the yield that you might get on a particular bond can be really wide, and you may not even have that information. Yep, absolutely true. You guys gave some good examples of how, like, price, quantity, time, we incorporate in our day-to-day lives, and it makes perfect sense, yet when you extend that into the world of trading, sometimes it gets so... It can be so confusing or complicated. You hear about this high-frequency trading, there's algorithms, there's all this stuff. Walk us through a little bit about what is high-frequency trading? How do I think about that? Am I somehow getting taken advantage of? because there's this black box, there's this group back here that just does something really fast by the millisecond. Right. Tell us how to think about that. A lot of this came to light after "Flash Boys" got published, right? So we all remember the Flash Crash, and this is actually a really good example and then "Flash Boys" got published, and we all kind of read it, and it was exciting, you know, but then you're on the other side of it, too, thinking, "Well, I don't have data centers that are, you know, really close to the exchange, so am I missing out? Are these guys fleecing me?" And there is a very aggressive and competitive industry for market makers to compete with one another to try to essentially shave just a little bit off of what that price is and buy it a little lower and sell it a little higher, and speed is of the essence, but Jake, you brought up a great point here, and I love this, too, you don't have to play that game as an investor. There are other options out there. You just think about doing it a better way. So maybe that's a good chance for you to elaborate a little on that? Well, I mean, look, as an individual investor, are you really gonna get in and compete with those big boys and try to, like, you know, build fiber optic cables that are gonna allow you to access the exchanges a little bit quicker? And I think when people hear about high-frequency trading, algorithmic trading, we're getting a lot of questions now about AI and how that impacts markets and impacts trading, people almost get a little bit concerned of, like, "Somehow the markets aren't gonna work right, or something's gonna go wrong, or I just understand it." And I think you can take comfort in is that, look, as all of this happens and more information gets into the market, at a high level, you probably could argue markets are probably working pretty darn well. They're processing all these information, and if you don't have to play that game, you sort of just take a step back and say, "Let markets do their work." Right. Have a good investment strategy, and have a manager that knows how to do what they need to in the market. Yes, yes. I think that's exactly right, right? You think about, and this is the important point, and this is what I love about what Jake's saying, is like, let the market makers fight over, you know, the quarter fractions of basis points that they'll have and taking out of the spread. We win from that, right? Just the market overall wins, because you have more information being incorporated into prices, that's a good thing, and spreads are tighter, and spreads being tighter means you get better execution prices, that's a good thing. So yeah, there's considerations when you go to trade, but overall, what you've seen, and I think you hit the nail on the head here, is this has been an evolution in improving market liquidity over time, so you can do things now that you couldn't do 30, 40 years ago. And looking at the fixed income market is a great example of that, right? What if you didn't have exchanges? What if you didn't have market makers? You know, are you doing peer-to-peer trading? Are you doing everything through a dealer? Eh, you know, then you start to see spreads widen out a little bit. That evolution of markets over time, I think you should be really excited as an investor on where we've got. I mean, shoot, we were up in New York last year, and we got a tour of the New York Stock Exchange, and really cool, and they talk about the original buttonwood tree, where traders came together and trading, and it's a great story, but think about that. I mean, if you wanna talk about spreads back then, I mean, can you imagine how wide the spread was? Right, yeah. And then even once the exchange gets established and there's the floor of the exchange, I mean, you're walking up with paper tickets, you're calling these things out, and we've seen an amazing evolution of markets over time, and that is a really positive thing, but we keep hammering this point of even today, you need to know how to access the market so you don't give money away. Right, right. And we've been bouncing around a little bit between, hey, the challenge of an individual investor competing somehow versus an institutional manager, you know, that just has scale and the different processes and systems build around that, so that part's hard, but I appreciate you guys' comment, which is you think about whether it's all the traders out there, the high-frequency trading is bringing more and more, I'll say, volume to the marketplace which ultimately lowers cost and lowers spread. So generally, I think that's been a very good thing for investors over time there, but sometimes you do hear about things like a fat-finger trade, or a flash crash, Yeah. Or some of these things, and it kind of unsettles people. And so walk us through things like that, and when you do get into some of these weird time periods, what can be an effective strategy when you think about transacting? Yeah, so we have to remember, even though there's really advanced algorithms that have been built, they were built by humans. So humans are imperfect, and therefore, the algorithms that they build are also imperfect. So this is kind of what the flash crash and some of these fat fingers have resulted in weird things happening in the market, and massive dislocations from reality as we understand it the day before and the day after, and what happens in the moment. And so I think that's sort of good context to say, you know, it's like, you have to watch out for these things. What would you hope that your manager has the ability to do in moments like that? It's probably a lot to ask that they're gonna, you know, fleece everybody in the market and figure out exactly what's happening, what the next move is. The better option, I think, especially for protecting the returns of the portfolio, which, again, is what we care most about as an asset manager is going back to flexibility. What if you didn't have to participate in the flash crash? I remember the flash crash very well, because I remember I was sitting in a trading room and my boss was at his computer, and we had CNBC on right behind us, and he's logging into his account, and he's trying to trade, 'cause he's freaking out, right? Awful idea. He lost an incredible amount of money that day. If you just didn't touch it- Let's just clarify, this was not a Dimensional? No, this was not a Dimensional. That's great. "He lost so much money." Yeah, yeah. I just wanna repeat, that person was not an employee of Dimensional. That person was not at Dimensional, it was not at Dimensional. But, you know, I didn't touch my account. That was a better result for me, right? And I think having that flexibility to step back and think, "Whoa, hold on, let's see where this winds up. I'm not gonna be involved in this today, 'cause I don't have to be." That's the value of flexibility. I've heard traders say sometimes that the best trade you make is the one you don't make, and I think that's a good example of that, of, again, if you're to trade and the market's not set up for you to execute well, you might give something away. Yep. How about things like circuit breakers? You do get periods of high volatility. Yeah. Usually on the downside, typically, some of these circuit breakers come in, and you just kinda slow the process down a little bit. What are your experiences around those? I mean, that's the thing with circuit breakers, which is if the market is actually moving lower because there's information coming into market prices, where it actually should be pushing it lower, you're delaying the inevitable. So what you've seen sometimes is sometimes these circuit breakers, particularly, you know, in emerging market countries, might not be, like, a day, it might last quite a bit longer than that, because you're trying to slow down, ultimately, the inevitable. Circuit breakers are good, though, because sometimes you do have some of these weird things like the flash crash that really have nothing to do with fundamentals, and it's just sort of a downward spiral, because one algorithm's reading off of what another algorithm's reading off of, and they're kind of all just reacting to a fat-finger trade. So it's not necessarily a bad thing, but we do all have to step back and think, "Well, the function of trading in the market is to inject information into it," right? That's one of the benefits you can have. Yes, there's the advantage of getting out of something and getting into something, but we can also view it from the perspective of people all over the world are spending trillions of dollars to inject information into the market, and that's good. Then we learn something about securities expected returns and what their price is according to the masses, which, you know, again, as we've talked about from active managers trying to beat it, is really a tough benchmark, right? The market tends to do a pretty good job pricing things. It's not perfect, but pretty good. How about time of day? Is that important when you think about transacting? And kinda where I'm going with that, too, is for an individual investor, or even a financial professional that's going out there and buying ETFs, you've got any questions of that, as active ETFs have really become pretty prominent in the industry. Yeah. How important is time of day when you think about trading? Very important. In this case, let's just isolate it to an ETF trade. Very important. So if you're trading at market open or you're trading at market close, there's a certain amount of uncertainty that your counterparty faces. If you're trading, if you put in a trade to trade right at market open, how do they know if it's gonna open higher or lower? They don't, there's not a market price out there. So your spreads tend to be a little bit wider at the open and a little bit wider at the close, 'cause you don't know what it's gonna look like tomorrow. So those are good examples of even though there is volume at the open in the close, maybe not the best time to execute, just because if you're forcing somebody else to wear risk, they're gonna charge you for it, so that's a danger. And same thing with FOMC announcements, right? You tend to see spreads widen out a little bit around Fed announcements, because it's gonna move markets. Who knows what's gonna happen, right? Even if there's a high degree of confidence, there's always a risk, and risk, if you're asking someone to take it, is gonna cost you something. That's ultimately the the punchline. If your job is to match buyers and sellers, or keep any of these things on your books for any period of time, and there's greater uncertainty, what are you gonna do? You're gonna charge people for it. Totally. And how does that show up? It shows up in wider bid-ask spreads. Yep. Yeah. And I wanna talk about this, too, from the context, 'cause now, you're starting to hear more about, like, 24/7 trading, or like- Right, yeah, a bunch of headlines. 23/6 or something like that. You know, they keep things, this is, like, it's not quite 24/7, but I think this is important, too, is like, when you look at other asset classes or even just equities that trade after hours when there aren't these market makers involved, when their computers are shut down, you see some pretty wild things. So I used to run the share repurchase program at a different company prior to when I came here, and I remember very clearly after hours, Mark Hurd, who was the former CEO of HP, was ousted in a pretty surprising move. Most people didn't see that coming. And I remember watching CNBC, and at the bottom, they've got, like, a ticker showing after-hours trades, and the ticker, HP, had a lot of volume for it after this news broke. HP is not the ticker for the company, HP, Hewlett Packard, it's the ticker for Helmerich & Payne, which is an energy company. So people get into the market, thinking, "Okay, I see HP, I'm gonna log into my brokerage account and trade HP, 'cause those two things are the same." They're not the same, right? And so you see some pretty wild dislocations in the market sometimes after hours, and of course, by the time open next day, it's corrected, right? 'Cause no one's gonna sort of let that go. You know, a market maker's gonna see that and enjoy that opportunity, but you do see wild things after hours. You do see wild things on the weekend, for example, when you're trading crypto, if you are, which, you know, I can't say I recommend it, but like, those are good examples to say, like, "Eh, actually, having a market maker involved is maybe a good thing?" So we think about our trading then, the trading costs, a couple things that are really important to that is a way to minimize that bid-ask spread around that. You know, be clear on your priorities. You got price, quantity, and time. You can get two of the three, which one are you going to give up on that one? And then Jake, we talked about, generally, turnover, how much buying and selling? There's always a cost to buy and sell. So the strategy is to minimize that cost, and one way to do that is not trade that much. Do your buying and selling, and I guess the last thing I'll get you guys' thoughts on this is if you're an individual investor and you're out there doing your own trading, whether it's a stock or a bond, and you're going up against an institution, you're probably gonna be on the short side of that one, right? Where they have the expertise, experts in this space, the systems, the processes, it's just a tough one to go against as an individual. Very tough, and even they are gonna have a tough time, 'cause they're not the only ones in the market, but again, you're gonna be egged on by the platforms and, you know, the brokerages that are saying, "You can do it, and if you're not doing it, you're a fool," right? "You're not taking charge of your financial freedom," so you're kind of being encouraged to do it. You need to take a step back, though, and say, "Who else is in this space? And is it an expectation should I be able to compete with them? Or would I even want to," right? Just focus on what your portfolio is meant to do. That's really where your long-term returns are gonna be coming from. What would you add to that, Jake? He's the expert, I got nothing. If you had your notes then maybe you'd have something. Gochnour, you've known me for 15 years, I don't do notes. No, you don't, and you're still really good at it. All right, everybody. Hey, thank you for joining "The Informed Investor" today. We appreciate your time. Be sure to check out that little survey down below there. We'd love to get some of your ideas for future topics that we can bring up on the show, and some of the questions we have been getting have been around this idea of an equal-weighted strategy. We have market cap waiting, we also have an equal-weighted strategy, maybe a way to reduce some of the exposure you get, particularly to the Mag 7 stocks. We'll come in and talk about that as a viable strategy. Thanks for joining and have a fantastic day.