Investing with Intelligent ETFs: Strategies for Profiting from the New Breed of Securities

by Isaacman, Max

• ISBN13: 9780071543897
• ISBN10: 0071543899
• Edition: 1st
• Format: Hardcover
• Copyright: 2008-09-12
• Publisher: McGraw-Hill Education

Summary

The first book of its kind,Investing with Intelligent ETFsscrutinizes one of the most innovative and popular investment securities on the financial market today. Attracted to ETFs' built-in diversification and their flexibility regarding trading and investing styles, high-level investors have been flocking to them for several years. At the present time, there are 646 ETFs, containing $620 billion in assets, and the types of strategies used are continually growing. ..Max Isaacman, author of the groundbreaking.How to be an Index Investor, offers a timely analysis that provides a close look at the intelligent ETFs available today, explaining how to use the latest securities and indexes to add risk-adjusted gain (alpha) to your portfolio. He introduces you to the various ETF providers and supplies the information you'll need about the many securities variations, including the most complex and specialized. You'll learn how to invest in: .. New intelligent ETFs that use quantitative measurements to beat the market. Fundamentally weighted ETFs, which at times outperform cap-weighted ETFs. Passive ETFs for sector representation and market participation. BRIC (Brazil, Russia, India, China) ETFs, from the fastest growing economies in the world ..Investing with Intelligent ETFsexplains how these and other ETFs are constructed, and why they are superior to stocks and mutual funds. Illustrating strategies previously available only to professional investors, it helps you maximize your leverage and versatility in today's increasingly complex but profitable global market. With this thorough, insightful book, you can participate in new innovative investment strategies with all the knowledge and confidence you'll need.

Author Biography

Max Isaacman is a former member of thePresident’s Club at Merrill Lynch and VP at Lehman Brothers. He is theauthor of McGraw-Hill’s How to Be An Index Investor (0-07-135683-5).

Table of Contents

Foreword	p. xv
Acknowledgments	p. xxi
Introduction	p. 1
The New ETFs	p. 1
Searching for Alpha	p. 2
The Index Revolution	p. 4
Intelligent Index Performance	p. 5
Using Alpha in Market Strategies	p. 8
Trading and Investing with ETFs	p. 15
Explaining Exchange-Traded Funds	p. 17
Advantages of Trading and Investing in ETFs	p. 18
The Creation and Redemption Process	p. 22
Tax Considerations	p. 26
ETFs and Mutual Fund Tax Consequences	p. 28
Market Makers and Specialists	p. 28
Harvesting Tax Losses Using ETFs	p. 29
Investing in a Rapidly Changing World	p. 33
Gavekal's View	p. 34
What Revolution Are We In?	p. 36
The "Platform" Operating Model	p. 37
The Growing U.S. Strength Using the Platform Model	p. 42
The Present Economic Age	p. 43
Types of Developing Growth	p. 44
The New Global Manufacturing Process	p. 48
The High Margins of the Platform Method	p. 49
Lower Stock Market and GDP Volatility	p. 49
The Lower U.S. Household Savings Rate	p. 51
The U.S. Balance-of-Trade Deficit	p. 53
Continued Global Expansion	p. 55
The Shrinking Middle Class	p. 56
PowerShares	p. 59
Using Intelligent ETFs	p. 60
The Intellidex Index	p. 61
Sector Consideration	p. 64
The Intellidex Approach and Attribution	p. 66
Intelligent Indexes in Relation to Stock Picking	p. 68
Development of the Intellidex Index	p. 71
False Signals and Intuitive Stock Selection	p. 73
Factors Included in the Intellidex Model	p. 74
The Intellidex Index Stock-Picking Model	p. 74
Intellidex Compared to Other Quantitative Approaches	p. 76
Intellidex Compared to Fundamentally Weighted Indexes	p. 78
Intelligent ETFs Expand to the Global Marketplace	p. 78
Ways to Weight Indexes	p. 81
Research Affiliates and Fundamental Weighting	p. 82
Are Markets Efficient?	p. 83
The Importance of Choosing Asset Classes	p. 84
The Performance-Drag Problem	p. 87
Fixing the Performance-Drag Problem	p. 89
Measuring Company Worth	p. 90
Creating Index Portfolios of Unique Characteristics	p. 91
Stock Rotation in Different Weighted Indexes	p. 93
Fundamental and Capitalization Weighting in Sector Weighting	p. 96
Rydex Investments	p. 101
The Rydex CurrencyShares	p. 101
How Rydex CurrencyShares Trusts Are Structured	p. 103
Advantages of the Rydex CurrencyShares	p. 104
Other Rydex CurrencyShares	p. 105
Taxes and Rydex CurrencyShares	p. 106
Noncorrelation to the Stock Markets	p. 106
Rydex ETFs	p. 107
Shortcomings in the Modern Portfolio Theory of Investing	p. 108
Rydex S&P Equal Weight ETF	p. 109
Past Limitation of the Mutual Fund Structure	p. 110
The Effect of Equal Weight Exposure to the Cap-Size Market Segment	p. 111
Stock Pickers Gravitate to RSP	p. 112
The Russell Top 50 ETF	p. 113
Rydex Style ETFs	p. 114
Rydex Equal Weight Sector ETFs	p. 115
The Rydex Equal-Weighted Technology Sector ETF	p. 116
Keeping the Creation and Redemption Process Tax Efficient	p. 117
Results of the RSP Creation and Redemption Process	p. 118
ProShares	p. 121
Indexing Is Filling a Need	p. 121
Advantages of ProShares	p. 122
The Changing Role of ETFs	p. 123
Increasing Exposure through ProShares	p. 124
Gaining Diversification Using ProShares	p. 125
Using Magnified ETFs for Sector Diversification	p. 126
Shorting Sectors with ProShares	p. 127
Market Cap-Size Hedging through ProShares	p. 128
How Does ProShares Achieve Magnified Results?	p. 128
How ProShares Achieves Magnified Returns	p. 129
Costs to the ETF Buyer	p. 130
Short and UltraShort Market Cap	p. 131
Wisdom Tree	p. 141
Advantages of Dividend-Weighted Indexes	p. 141
Transparency of Cash Dividends	p. 143
Criteria for Dividend-Weighted Index Inclusion	p. 143
Wisdom Tree: Index Creator and ETF Sponsor	p. 144
International and Domestic Dividend Indexing	p. 145
Wisdom Tree Methodology and Transparency	p. 148
International Wisdom Tree Returns	p. 149
The Origin and Growth of Intelligent ETFs	p. 153
The Role of the American Stock Exchange (AMEX) in the ETF Revolution	p. 154
The Start of the Intelligent Revolution	p. 154
The Changing ETF Scene	p. 156
Modified Cap-Weighted Indexes and Specialized ETFs	p. 157
Modified Cap-Weighting Methods	p. 157
Accomplishing Weighting Diversification in Indexes	p. 158
Newer and Unique ETFs	p. 159
Environmental Services ETF	p. 162
Van Eck Steel ETF	p. 163
Van Eck Russia ETF	p. 165
Global Alternative Energy ETF	p. 167
Van Eck Weighting Methodology	p. 168
Claymore Securities	p. 171
Claymore/Zacks Yield Hog ETF	p. 171
Claymore/Sabrient Stealth ETF	p. 173
Claymore/Sabrient Insider	p. 174
Claymore/Robeco Developed International Equity ETF	p. 176
The Varied Claymore ETF Approach	p. 177
Claymore BRIC ETF	p. 178
Claymore S&P Global Water Index ETF	p. 180
The Claymore Oil Sands Sector ETF	p. 181
The Claymore/Ocean Tomo Patent ETF	p. 182
Claymore/Zacks Sector Rotation ETF	p. 183
Claymore ETF History	p. 184
Specialized ETF Approaches	p. 187
First Trust Portfolios	p. 187
First Trust Portfolios' ETFs	p. 188
AlphaDEX Enhanced Index ETF Series	p. 189
Ways to Weight and Add Intelligence to Indexing	p. 190
ETF Approaches in the Information Technology Group	p. 192
Looking Forward to the Future of the Tech Sector	p. 195
ETF Representation in the Tech Sector	p. 196
The Importance of Investing in Emerging Markets	p. 201
Currency Risks of Investing in Foreign ETFs	p. 203
The Major Emerging Market: China	p. 203
The Safety of ETF Investing	p. 210
The Future of the ETF Market	p. 212
Index	p. 215
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