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Exchange-Traded Funds For Dummies®, 2nd Edition

Book Description

The fast and easy way to get a handle on ETFs

Exchange-traded funds (ETFs) have a strong foothold in the marketplace, because they are less volatile than individual stocks, cheaper than most mutual funds, and subject to minimal taxation. But how do you use this financial product to diversify your investments in today's fast-growing and ever-changing market?

Exchange-Traded Funds For Dummies shows you in plain English how to weigh your options and pick the exchange-traded fund that's right for you. It tells you everything you need to know about building a lean, mean portfolio and optimizing your profits. Plus, this updated edition covers all of the newest ETF products, providers, and strategies, as well as Commodity ETFs, Style ETFs, Country ETFs, and Inverse ETFs.

  • Create the stock (equity) side of your portfolio

  • Handle risk control, diversification, and modern portfolio theory

  • Manage small, large, sector, and international investments

  • Add bonds, REITs, and other ETFs

  • Invest smartly in precious metals

  • Work non-ETFs into your investment mix

  • Revamp your portfolio to fit life changes

  • Fund your retirement years

Plus, you'll get answers to commonly asked questions about ETFs and advice on how to avoid mistakes that many investors—even the experienced ones—make. It provides forecasts of the future for ETFs and personal spending and also provides a complete list of ETFs and Web resources to assist your investment. With Exchange-Traded Funds For Dummies, you'll soon discover what makes ETFs the hottest investment on the market!

Table of Contents

  1. Cover
  2. Table of Contents
  3. Title Page
  4. Introduction
  5. Part I: The ABCs of ETFs
    1. Chapter 1: The (Sort of Still) New Kid on the Block
      1. In the Beginning
      2. Fulfilling a Dream
      3. Not Quite as Popular as the Beatles, But Getting There
      4. Ready for Prime Time
    2. Chapter 2: What the Heck Is an ETF, Anyway?
      1. The Nature of the Beast
      2. Choosing between the Classic and the New Indexes
      3. Preferring ETFs over Individual Stocks
      4. Distinguishing ETFs from Mutual Funds
      5. Why the Big Boys Prefer ETFs
      6. Why Individual Investors Are Learning to Love ETFs
      7. Getting the Professional Edge
      8. Passive versus Active Investing: Your Choice
      9. Do ETFs Belong in Your Life?
    3. Chapter 3: Getting to Know the Players
      1. Creating an Account for Your ETFs
      2. Introducing the Shops
      3. Presenting the Suppliers
      4. Familiarizing Yourself with the Indexers
      5. Meeting the Middlemen
      6. Meeting the Wannabe Middlemen
  6. Part II: Building the Stock (Equity) Side of Your Portfolio
    1. Chapter 4: Risk Control, Diversification, and Some Other Things You Need to Know
      1. Risk Is Not Just a Board Game
      2. Smart Risk, Foolish Risk
      3. How Risk Is Measured
      4. Meet Modern Portfolio Theory
      5. Mixing and Matching Your Stock ETFs
    2. Chapter 5: Large Growth: Muscular Money Makers
      1. Style Review
      2. Big and Brawny
      3. ETF Options Galore
    3. Chapter 6: Large Value: Counterintuitive Cash Cows
      1. Six Ways to Recognize Value
      2. Looking for the Best Value Buys
    4. Chapter 7: Small Growth: Sweet Sounding Start-ups
      1. Getting Real about Small Cap Investments
      2. Your Choices for Small Growth
      3. Smaller than Small: Meet the Micro Caps
    5. Chapter 8: Small Value: Diminutive Dazzlers
      1. It’s Been Quite a Ride
      2. What About the Mid Caps?
    6. Chapter 9: Going Global: ETFs without Borders
      1. The Ups and Downs of Different Markets around the World
      2. Finding Your Best Mix of Domestic and International
      3. Not All Foreign Nations — or Stocks — Are Created Equal
      4. Choosing the Best International ETFs for Your Portfolio
    7. Chapter 10: Sector Investing: ETFs According to Industry
      1. Selecting Stocks by Sector, not Style
      2. Speculating on the Next Hot Industry
      3. Doing Sector Investing Right
      4. Sector Choices by the Dozen
    8. Chapter 11: Specialized Stock ETFs
      1. Investing for a Better World
      2. Dividend Funds: The Search for Steady Money
      3. Investing in Initial Public Offerings
      4. Funds That (Supposedly) Thrive When the Market Takes a Dive
      5. Funds That Double the Thrill of Investing (for Better or Worse)
      6. All-In-One ETFs: For the Ultimate Lazy Portfolio
  7. Part III: Adding Bonds, REITs, and Other ETFs to Your Portfolio
    1. Chapter 12: For Your Interest: The World of Bond ETFs
      1. Tracing the Track Record of Bonds
      2. Tapping into Bonds in Various Ways
      3. Sampling Your Basic Bond-ETF Menu
      4. Moving Beyond Basics into Municipal and Foreign Bonds
      5. Determining the Optimal Fixed Income Allocation
    2. Chapter 13: Real Estate Investment Trusts (REITs): Becoming a Virtual Landlord
      1. Considering Five Distinguishing Characteristics of REITs
      2. Calculating a Proper REIT Allocation
      3. Picking REIT ETFs for Your Portfolio
    3. Chapter 14: All That Glitters: Gold, Silver, and Other Commodities
      1. Gold, Gold, Gold!
      2. Silver: The Second Metal
      3. Oil and Gas: Truly Volatile Commodities
      4. (Somewhat) Safer Commodity Plays
      5. Playing the Commodity Market Indirectly
    4. Chapter 15: Working Non-ETFs and Active ETFs into Your Investment Mix
      1. Tinkering with an Existing Stock or Mutual Fund Portfolio
      2. Looking Beyond the Well-Rounded ETF Portfolio
      3. Going Active with ETFs
  8. Part IV: Putting It All Together
    1. Chapter 16: Sample ETF Portfolio Menus
      1. So, How Much Risk Can You Handle and Still Sleep at Night?
      2. Keys to Optimal Investing
      3. Finding the Perfect Portfolio Fit
    2. Chapter 17: Exercising Patience: The Key to Any Investment Success
      1. The Tale of the Average Investor (A Tragicomedy in One Act)
      2. The Value Line Paradox
      3. “Investment Pornography” in Your Mailbox (and Mine)
      4. Patience Pays, Literally
    3. Chapter 18: Exceptions to the Rule (Ain't There Always)
      1. Rebalancing to Keep Your Portfolio Fit
      2. Contemplating Tactical Asset Allocation
      3. Harvesting Tax Losses, and the IRS’s Oh-So-Tricky “Wash Rule”
      4. Revamping Your Portfolio with Life Changes: Marriage, Divorce, and Babies
      5. Are Options an Option for You?
    4. Chapter 19: Using ETFs to Fund Your Golden Years
      1. Aiming for Economic Self-Sufficiency
      2. Curing the 401(k) Blues
      3. Strategies for the Self-Employed
      4. Ushering Your Portfolio into Retirement Readiness
      5. Withdrawing Funds to Replace Your Paycheck
  9. Part V: The Part of Tens
    1. Chapter 20: Ten FAQs about ETFs
      1. Are ETFs Appropriate for Individual Investors?
      2. Are ETFs Risky?
      3. Do I Need a Financial Professional to Set Up and Monitor an ETF Portfolio?
      4. How Much Money Do I Need to Invest in ETFs?
      5. With Hundreds of ETFs to Choose From, Where Do I Start?
      6. Where Is the Best Place for Me to Buy ETFs?
      7. Is There an Especially Good or Bad Time to Buy ETFs?
      8. Do ETFs Have Any Disadvantages?
      9. Does It Matter Which Exchange My ETF Is Traded On?
      10. Which ETFs Are Best in My IRA, and Which Are Best in My Taxable Account?
    2. Chapter 21: Ten Mistakes Most Investors (Even Smart Ones) Make
      1. Paying Too Much for an Investment
      2. Failing to Properly Diversify
      3. Taking on Inappropriate Risks
      4. Selling Out When the Going Gets Tough
      5. Paying Too Much Attention to Recent Performance
      6. Not Saving Enough for Retirement
      7. Having Unrealistic Expectations of Market Returns
      8. Discounting the Damaging Effect of Inflation
      9. Not Following the IRS’s Rules
      10. Failing to Incorporate Investments into a Broader Financial Plan
    3. Chapter 22: Ten Forecasts about the Future of ETFs and Personal Investing
      1. ETF Assets Will Continue to Grow . . . for Better or Worse
      2. More Players May Enter the Field, but Only a Few
      3. Investors Will Get Suckered into Buying Packaged Products
      4. ETF Investors Will Have More, and Better, Options
      5. The Markets Will (Unfortunately) See Greater Correlation than in the Past
      6. Asset Class Returns Will Revert toward Their Historic Means
      7. Taxes Will Rise
      8. Inflation Will Remain Tame
      9. Private Pensions (of Sorts) May Emerge from the Rubble
      10. Hype Will Prevail!
  10. Part VI: Appendixes
    1. Appendix A: Great Web Resources to Help You Invest in ETFs
      1. Independent, ETF-Specific Websites
      2. Websites of ETF Providers
      3. Retirement Calculators
      4. Financial Supermarkets
      5. Stock Exchanges
      6. Specialty Websites
      7. Where to Find a Financial Planner
      8. Regulatory Agencies
      9. The People Who Create the Indexes
      10. Good Places to Go for General Financial News, Advice, and Education
      11. Yours Truly
    2. Appendix B: Glossary