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The ETF Book: All You Need to Know About Exchange-Traded Funds, Updated Edition

Book Description

Exchange-traded funds (ETFs) are revolutionizing the investment industry. From their introduction in 1993, ETFs have expanded exponentially over the past fifteen years. You, as an informed investor, need to know what makes ETFs unique, how they work, and which funds may help you achieve your financial goals. The updated edition provides the most current look at the ETF market, where the number of funds has doubled since the book first published in December 2007. A huge number of bonds funds, commodities funds, currency funds, leverage and short funds have been introduced. In addition, actively managed ETFs are here now, and some major mutual fund companies, like Fidelity and PIMCO, are getting into the market. Remarkably, the terminology in the ETP marketplace is also evolving at a rapid pace. The acronym ETP for exchange-traded product has become an industry standard. The term did not exist two years ago.

Written by veteran financial professional and experienced author Richard Ferri, The ETF Book, Updated Edition gives you a broad and deep understanding of this important investment vehicle and provides you with the tools needed to successfully integrate exchange-traded funds into any portfolio.

This detailed, yet clearly articulated guide contains the most up-to-date information on navigating the growing number of ETFs available in today's marketplace. Divided into four comprehensive parts, this guide addresses everything from ETF basics and in-depth fund analysis to the tax benefits of using ETFs. Included are a variety of portfolio management strategies using ETFs and examples of different model portfolios that you can easily adapt to your own investment endeavors.

Whether you're just getting started or are a seasoned ETF investor, The ETF Book, Updated Edition will help enhance your understanding of this evolving field by:

  • Examining the fundamental differences between exchange-traded portfolios

  • Highlighting how to effectively implement a wide selection of ETFs from

  • Exploring specific ETF strategies?from buy and hold to market timing and sector rotation

  • Introducing Index Strategy Boxes?a new way to understand index construction and how a fund is investing your money

  • And much more

Each chapter of The ETF Book, Updated Edition offers concise coverage of various issues. It is filled with in-depth insights on different types of ETFs and practical advice on how to select and manage them. The appendixes are an added benefit, offering an ETF Resource List, which will point you to more places for information on these structures, and a detailed Glossary to help you with industry-specific definitions.

The ETF Book, Updated Edition is an invaluable road map for developing a winning investment strategy. Armed with the knowledge found throughout these pages, you'll be prepared to build a solid portfolio of ETFs that will benefit you for years to come.

Table of Contents

  1. Cover
  2. Contents
  3. Title
  4. Copyright
  5. Dedication
  6. Foreword
  7. Acknowledgments
  8. Introduction
  9. Part I: ETF Basics
    1. Chapter 1: ETFs from Evolution to Revolution
      1. ETFs Are a Growth Industry
      2. A Short History of Mutual Funds
      3. The Future of ETFs
      4. Summary
    2. Chapter 2: The Nuts and Bolts of ETFs
      1. Acts like a Fund, Trades like a Stock
      2. Closed-End Fund Issues
      3. ETFs to the Rescue
      4. Summary
    3. Chapter 3: Types of Exchange-Traded Portfolios
      1. The Expanding Exchange-Traded Universe
      2. Putting It All Together
      3. Summary
    4. Chapter 4: ETF Benefits and Drawbacks
      1. The Positive Aspects of ETFs
      2. The Negative Aspects of ETFs
      3. Guide to ETF Characteristics
      4. Summary
    5. Chapter 5: Actively Managed ETFs
      1. The First Filings
      2. Not Quite Open-End Active
      3. Advantages of Actively Managed ETFs
      4. Disadvantages of Actively Managed ETFs
      5. Summary
  10. Part II: Indexes That ETFs Follow
    1. Chapter 6: Benchmark Indexes and Strategy Indexes
      1. A Definition of Benchmark Indexes
      2. A Definition of Strategy Indexes
      3. Characteristics of a Good Benchmark
      4. Details of Benchmark Indexes
      5. Details of Strategy Indexes
      6. A Different View on Indexes
      7. Summary
    2. Chapter 7: Index Strategy Boxes
      1. Indexes Follow Rules
      2. Index Strategy Boxes
      3. Benchmark Indexes and Strategy Indexes
      4. Summary
    3. Chapter 8: Index Security Selection
      1. Security Selection Categorization
      2. Passive Security Selection
      3. Screened Security Selection
      4. Quantitative Security Selection
      5. When One Selection Method Does Not Fit
      6. Summary
    4. Chapter 9: Index Security Weighting
      1. Capitalization Weighting
      2. Fundamental Weighting
      3. Fixed Weighting
      4. Modified Security-Weighting Schemes and Style Biases
      5. Summary
  11. Part III: ETF Styles and Choices
    1. Chapter 10: Broad U.S. Equity and Style ETFs
      1. Broad Market Benchmarks and Style Components
      2. Benchmark Index ETFs
      3. U.S. Equity Strategy Index ETFs
      4. Sample List of Broad U.S. Equity and Style ETFs
    2. Chapter 11: Global Equity ETFs
      1. Advantages of Investing Internationally
      2. Disadvantages of Investing Internationally
      3. Broad International and Global Market Benchmarks
      4. International Strategy Indexes
      5. Global and International ETFs List
      6. Summary
    3. Chapter 12: Industry Sector ETFs
      1. The Evolution of Industry ETFs
      2. Industry Sector Categorization
      3. Industry Strategy Indexes
      4. REIT ETFs
      5. A Partial List of Industry ETFs
      6. Summary
    4. Chapter 13: Special Equity ETFs
      1. Thematic Investing
      2. Actively Managed Indexes
      3. Leveraged and Short Beta ETFs
      4. Hedging with ETFs
      5. Special Equity ETFs List
      6. Summary
    5. Chapter 14: Fixed Income ETFs
      1. Bond Market Structure
      2. Treasury Indexes
      3. Mortgages
      4. Asset-Backed Securities
      5. Investment-Grade Corporate Bonds
      6. High-Yield Corporate Bonds
      7. Composite Indexes
      8. Barclays Aggregate Bond Index
      9. Municipal Bond ETFs
      10. International Fixed Income ETFs
      11. Preferred Stock ETFs
      12. Fixed Income ETF List
      13. Summary
    6. Chapter 15: Commodity and Currency ETFs
      1. Commodities Basics
      2. Commodity ETFs
      3. Commodities Indexes
      4. A Progression of New Funds
      5. Disadvantages of Commodity ETFs
      6. Currencies
      7. The Future of Futures ETFs
      8. Commodity and Currency Fund List
      9. Summary
  12. Part IV: Portfolio Management Using ETFs
    1. Chapter 16: Portfolio Management Strategies
      1. Passive Investing
      2. Life Cycle Investing
      3. Active Portfolio Strategies
      4. Special Strategies and Uses
      5. Tips for ETF Investors
      6. Summary
    2. Chapter 17: Passive ETF Portfolios
      1. Buy, Hold, and Rebalance
      2. Core and Explore
      3. Realistic Returns from Passive Portfolios
      4. The Forecast
      5. Summary
    3. Chapter 18: Life Cycle Investing
      1. Life Cycle Models
      2. ETF Portfolios for Each Stage
      3. Summary
    4. Chapter 19: Active Portfolio Management with ETFs
      1. Nominal and Risk-Adjusted Returns
      2. Top-Down Strategies
      3. Momentum Investing
      4. Technical Analysis
      5. Prudence Is Recommended
      6. Summary
    5. Chapter 20: Special Portfolio Strategies
      1. Unique Characteristics of ETFs
      2. Using ETFs to Reduce Industry Risk
      3. Pairs Trading and Market-Neutral Strategies
      4. Currency Hedging and Speculation
      5. Tax Loss Harvesting
      6. Future ETF Strategies
      7. Summary
    6. Chapter 21: Operational Tips for ETF Investors
      1. Selecting a Custodian
      2. Trading ETF Shares
      3. Asset Location Tips
      4. Rebalancing ETFs
      5. Hiring an Investment Manager
      6. Summary
  13. Appendix A: Index Strategy Box Abbreviation Guide
  14. Appendix B: ETF Resource List
  15. Glossary
  16. Index
  17. About the Author