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

by Carrel, Lawrence

• ISBN13: 9780470138946
• ISBN10: 0470138947
• Edition: 1st
• Format: Hardcover
• Copyright: 2008-09-09
• Publisher: Wiley

Summary

Praise for ETFs 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 InvestingDespite 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.

Author Biography

Lawrence Carrel, as a senior writer, took over the weekly ETF and mutual fund columns at TheStreet.com in 2007. Prior to that, he created SmartMoney.com's "ETF Focus" column, a weekly look at the ETF industry from the individual investor's point of view. Before joining SmartMoney in 1999, Carrel was a founding member of the Wall Street Journal Online, where he covered the stock market, edited breaking news, and was one of the writers of the "Cyber Investing" column. Carrel holds a bachelor's degree in applied economics and management and communications from Cornell University.

Table of Contents

Preface	p. ix
Acknowledgments	p. xiii
ETFs-The Newfangled Mutual Funds	p. 1
How ETFs Stack Up against Mutual Funds	p. 2
Greater Flexibility	p. 3
Lower Fees	p. 4
More Tax Efficient	p. 5
Greater Transparency	p. 6
Precise Allocations	p. 6
Investment in Alternative Asset Classes	p. 7
One Caveat	p. 7
Summary	p. 8
ETF History Lesson: How a New Type of Fund Was Born	p. 11
A Short History of the Amex	p. 13
The Father of the ETF	p. 17
Philly Strikes First	p. 18
Back to the Drawing Board	p. 21
Along Came a Spider	p. 26
The Birth of an Industry	p. 27
Let's Do It Again	p. 29
What Tangled Webs We Weave	p. 30
Building a Business	p. 33
Shine On, You Crazy DIAmonds	p. 34
Arachnophobia?	p. 35
Wedding Bells	p. 35
The Biggest ETF Launch	p. 37
All in the Family	p. 41
The First Assault	p. 45
If You Can't Beat 'Em, Join 'Em	p. 46
Builders and Bonds	p. 47
Free Again	p. 49
The Evolution of the ETF	p. 51
The Importance of a Broadly Diversified Portfolio	p. 53
The Appeal of Investment Companies	p. 55
Types of Investment Companies	p. 56
Types of Mutual Funds	p. 58
Running a Mutual Fund	p. 60
The Creation of an ETF	p. 63
Summary	p. 67
Index Fund-amentals	p. 69
Why an Index?	p. 70
Fund Management Options	p. 72
The Rise of the Index Funds	p. 76
The Big Index Companies	p. 79
Indexes from the Stock Exchanges	p. 82
Actively Managed ETFs	p. 84
Summary	p. 84
Fee Bitten	p. 87
Wall Street Produces Vintages	p. 87
Looking for Low Management Fees	p. 89
Summary	p. 92
The Better Mousetrap: How Can ETFs Charge So Little?	p. 95
Transparent Costs of Mutual Funds	p. 96
Hidden Costs of Mutual Funds	p. 105
The Creation Unit: How They Make ETFs So Cheap	p. 110
So Long, Transaction Costs	p. 114
So What Costs Do ETFs Have?	p. 119
Why Would I Ever Buy a Mutual Fund?	p. 123
Summary	p. 127
The New Indexers	p. 129
Missed Opportunity	p. 132
Unfair Fight	p. 136
BONY Builds a BLDR	p. 137
The Name Is Bond	p. 138
Rydex Rides In	p. 140
Vanguard Makes a Splash	p. 142
There's Power in Them There Shares	p. 144
Mutual Fund Scandal Helps ETFs	p. 145
PowerShares Becomes a Powerhouse ... and Other Important Developments of 2005	p. 147
The Buy-Out	p. 148
Opening the Floodgates	p. 149
The Fundamentalists	p. 155
Grow, Baby, Grow	p. 163
Summary	p. 168
The ETFs That Aren't ETFs: ETPs, ETVs, and ETNs	p. 171
You've Got a HOLDR to Cry On	p. 174
Exchange-Traded Notes	p. 176
Commodity-Based ETVs	p. 180
Money Makes the World Go 'Round	p. 199
Summary	p. 204
Putting the "Trade" in Exchange-Traded Funds	p. 217
Discount Brokers	p. 219
The Actual Trade	p. 220
Going Long to Go Short	p. 226
Options on ETFs	p. 229
Summary	p. 232
Building Your Own ETF Portfolio	p. 235
The Simplest Portfolio	p. 237
Assessing Your Risk	p. 237
Strategic and Tactical Asset Allocation	p. 241
Foundation Portfolios	p. 248
Not Following the Herd	p. 258
Tax-Loss Harvesting	p. 265
Hiring an Investment Adviser	p. 267
Summary	p. 269
The Future of ETFs	p. 273
The NYSE-Amex Merger	p. 274
Specialists and Seed Capital	p. 275
Actively Managed ETFs	p. 279
Entering the 401(k) Market	p. 281
In Conclusion	p. 283
How to Decide Which ETFs Are Best for You	p. 285
Notes	p. 289
About the Author	p. 300
Index	p. 301
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