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ETFs for the Long Run: What They Are, How They Work, and Simple Strategies for Successful Long-Term Investing

Book Description

Praise forETFs For The Long Run

"As the title of the book suggests, ETFs are going to be an increasingly important reality for a broad class of investors in coming years. This book offers the reader real understanding of this growing force in our economic lives."

—Robert J. Shiller, Arthur M. Okun Professor of Economics at Yale University, Co-founder and Chief Economist at MacroMarkets LLC

"ETFs for the Long Run is a fascinating read. A seasoned financial industry journalist, Lawrence Carrel does an excellent job of highlighting exchange traded funds' meteoric rise in popularity over the last few years. A terrific book for anyone looking to grasp the ABCs of ETF investing."

—Jerry Moskowitz, President, FTSE Americas Inc.

"ETFs for the Long Run provides a unique combination of a detailed history of the development of ETFs, a clear explanation of the sophisticated mechanics of ETFs, an assessment of investors' choices amongst this dynamic product area, and unbiased recommendations for appropriate portfolio allocation to these efficient investment tools. Lawrence Carrel has done investors and the industry a great service in pulling these four elements together in a highly readable and often entertaining book.

—Steven Schoenfeld, Chief Investment Officer, Global Quantitative Management, Northern Trust, and Editor, Active Index Investing

Despite the incredible growth of exchange-traded funds (ETFs) and the fact they've been on the market for fifteen years, some investors are still either unaware of the effectiveness of ETFs or unsure of how to use them in their investment endeavors.

That's why respected ETF expert and journalist Lawrence Carrel has written ETFs for the Long Run. Filled with in-depth insights and practical advice, this reliable resource puts ETFs in perspective and reveals how they can help you profit in both up and down markets.

Page by page, Carrel takes you through the ins and outs of ETFs, including their history, the tax benefits and minimal charges associated with them, and the fundamental differences between ETFs and other types of investments. He also provides you with the resources and tools needed to trade ETFs and build your own ETF portfolio.

You may have heard about ETFs while researching other investments or speaking with an investment advisor. If you want to learn more about them, this book will provide you with a clear understanding of what ETFs are, how they work, and how they can be used to create a low-cost, liquid, and diversified portfolio.

Table of Contents

  1. Title Page
  2. Copyright Page
  3. Dedication
  4. Preface
  5. Acknowledgements
  6. CHAPTER 1 - ETFs—The Newfangled Mutual Funds
    1. How ETFs Stack Up against Mutual Funds
    2. Greater Flexibility
    3. Lower Fees
    4. More Tax Efficient
    5. Greater Transparency
    6. Precise Allocations
    7. Investment in Alternative Asset Classes
    8. One Caveat
    9. Summary
  7. CHAPTER 2 - ETF History Lesson
    1. A Short History of the Amex
    2. The Father of the ETF
    3. Philly Strikes First
    4. Back to the Drawing Board
    5. Along Came a Spider
    6. The Birth of an Industry
    7. Let’s Do It Again
    8. What Tangled Webs We Weave
    9. Building a Business
    10. Shine On, You Crazy DIAmonds
    11. Arachnophobia?
    12. Wedding Bells
    13. The Biggest ETF Launch
    14. All in the Family
    15. The First Assault
    16. If You Can’t Beat ’Em, Join ’Em
    17. Builders and Bonds
    18. Free Again
  8. CHAPTER 3 - The Evolution of the ETF
    1. The Importance of a Broadly Diversified Portfolio
    2. The Appeal of Investment Companies
    3. Types of Investment Companies
    4. Types of Mutual Funds
    5. Running a Mutual Fund
    6. The Creation of an ETF
  9. CHAPTER 4 - Index Fund-amentals
    1. Why an Index?
    2. Fund Management Options
    3. The Rise of the Index Funds
    4. The Big Index Companies
    5. Indexes from the Stock Exchanges
    6. Actively Managed ETFs
  10. CHAPTER 5 - Fee Bitten
    1. Wall Street Produces Vintages
    2. Looking for Low Management Fees
  11. CHAPTER 6 - The Better Mousetrap
    1. Transparent Costs of Mutual Funds
    2. Hidden Costs of Mutual Funds
    3. The Creation Unit: How They Make ETFs So Cheap
    4. So Long, Transaction Costs
    5. So What Costs Do ETFs Have?
    6. Why Would I Ever Buy a Mutual Fund?
    7. Summary
  12. CHAPTER 7 - The New Indexers
    1. Missed Opportunity
    2. Unfair Fight
    3. BONY Builds a BLDR
    4. The Name Is Bond
    5. Rydex Rides In
    6. Vanguard Makes a Splash
    7. There’s Power in Them There Shares
    8. Mutual Fund Scandal Helps ETFs
    9. PowerShares Becomes a Powerhouse . . . and Other Important Developments of 2005
    10. The Fundamentalists
    11. Grow, Baby, Grow
    12. Summary
  13. CHAPTER 8 - The ETFs That Aren’t ETFs
    1. You’ve Got a HOLDR to Cry On
    2. Exchange-Traded Notes
    3. Commodity-Based ETVs
    4. Money Makes the World Go ’Round
    5. Summary
  14. CHAPTER 9 - Putting the “Trade” in Exchange-Traded Funds
    1. Discount Brokers
    2. The Actual Trade
    3. Going Long to Go Short
    4. Options on ETFs
    5. Summary
  15. CHAPTER 10 - Building Your Own ETF Portfolio
    1. The Simplest Portfolio
    2. Assessing Your Risk
    3. Strategic and Tactical Asset Allocation
    4. Foundation Portfolios
    5. Not Following the Herd
    6. Tax-Loss Harvesting
    7. Hiring an Investment Adviser
  16. CHAPTER 11 - The Future of ETFs
    1. The NYSE-Amex Merger
    2. Specialists and Seed Capital
    3. Actively Managed ETFs
    4. Entering the 401(k) Market
  17. APPENDIX - How to Decide Which ETFs Are Best for You
  18. Notes
  19. About the Author
  20. Index