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

Overview

Over the past few years, exchange-traded funds (ETFs) have gainedwider recognition among retail investors and become a staple in theportfolios of many individuals. In addition to its flexibility andtransparency, the ETF's ability to track asset classes besidesstocks and bonds—such as commodities andcurrencies—has allowed investors to own a liquid,diversified portfolio for a minimal investment.

Respected ETF expert and journalist Lawrence Carrel knows howeffective this financial ...

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Overview

Over the past few years, exchange-traded funds (ETFs) have gainedwider recognition among retail investors and become a staple in theportfolios of many individuals. In addition to its flexibility andtransparency, the ETF's ability to track asset classes besidesstocks and bonds—such as commodities andcurrencies—has allowed investors to own a liquid,diversified portfolio for a minimal investment.

Respected ETF expert and journalist Lawrence Carrel knows howeffective this financial product can be, and now, with ETFs forthe Long Run, he'll show what they are and how they work's well as outline simple strategies you can use toincorporate them into your investment endeavors.

The journey begins with a brief history of ETFs, who theindustry leaders are, and how they got there. After thisintroduction, you'll become familiar with the fundamentaldifferences between ETFs and other types of investments, such asmutual funds. You'll also discover the advantages that an ETF'sindexing structure has over an actively managed product.

With this information in hand, you'll be prepared to delve intothe nuts and bolts of the ETF and see why it's one of the mostefficient ways to gain exposure to today's market. Page by page,Carrel skillfully examines the unparalleled benefits associatedwith ETFs, explores new exchange-traded vehicles(ETVs)—which are very similar to ETFs—and addressesinnovations within this area that have created more diverseopportunities for today's individual investor. Along the way,Carrel also reminds us that while a fund's returns can't be knownahead of time, its costs can—so focusing on cutting thosecosts can save you thousands of dollars down the road.

Rounding out this detailed discussion of ETFs are two chaptersdedicated to building your own ETF portfolio, touching oneverything from the mechanics of trading to designing assetallocation strategies. Here, Carrel calls upon a select group offinancial professionals to help you understand a wide variety ofportfolio construction possibilities and implement the ones thatbest suit your investment style.

The basic challenge that every investor faces is creating abroadly diversified portfolio for the least amount of money. ETFscan help you achieve this goal, and ETFs for the Long Runwill show you exactly how.

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Editorial Reviews

From the Publisher
"This book should go a long way to helping not just investors but top-notch financial professionals…" (Research Magazine)
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Product Details

  • ISBN-13: 9780470138946
  • Publisher: Wiley
  • Publication date: 9/9/2008
  • Edition number: 1
  • Pages: 306
  • Sales rank: 1,243,965
  • Product dimensions: 6.30 (w) x 9.10 (h) x 1.20 (d)

Meet the Author

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.

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Table of Contents

Preface.

Acknowledgments.

Chapter 1: ETFs–The Newfangled Mutual Funds.

How ETFs Stack Up against Mutual Funds.

Greater Flexibility.

Lower Fees.

More Tax Efficient.

Greater Transparency.

Precise Allocations.

Investment in Alternative Asset Classes.

One Caveat.

Summary.

Chapter 2: ETF History Lesson: How a New Type of Fund WasBorn.

A Short History of the Amex.

The Father of the ETF.

Philly Strikes First.

Back to the Drawing Board.

Along Came a Spider.

The Birth of an Industry

Let's Do It Again.

What Tangled Webs We Weave.

Building a Business.

Shine On, You Crazy DIAmonds.

Arachnophobia?

Wedding Bells.

The Biggest ETF Launch.

All in the Family.

The First Assault.

If You Can't Beat 'Em, Join 'Em.

Builders and Bonds.

Free Again.

Chapter 3: The Evolution of the ETF.

The Importance of a Broadly Diversified Portfolio.

The Appeal of Investment Companies.

Types of Investment Companies.

Types of Mutual Funds.

Running a Mutual Fund.

The Creation of an ETF.

Summary.

Chapter 4: Index Fund-amentals.

Why an Index?

Fund Management Options.

The Rise of the Index Funds.

The Big Index Companies.

Indexes from the Stock Exchanges.

Actively Managed ETFs.

Summary.

Chapter 5: Fee Bitten.

Wall Street Produces Vintages.

Looking for Low Management Fees.

Summary.

Chapter 6: The Better Mousetrap: How Can ETFs Charge SoLittle?

Transparent Costs of Mutual Funds.

Hidden Costs of Mutual Funds.

The Creation Unit: How They Make ETFs So Cheap.

So Long, Transaction Costs.

So What Costs Do ETFs Have?

Why Would I Ever Buy a Mutual Fund?

Summary.

Chapter 7: The New Indexers.

Missed Opportunity.

Unfair Fight.

BONY Builds a BLDR.

The Name Is Bond.

Rydex Rides In.

Vanguard Makes a Splash.

There's Power in Them There Shares.

Mutual Fund Scandal Helps ETFs.

PowerShares Becomes a Powerhouse—and OtherImportant Developments of 2005.

The Buy-Out.

Opening the Floodgates.

The Fundamentalists.

Grow, Baby, Grow.

Summary.

Chapter 8: The ETFs That Aren't ETFs: ETPs, ETVs, andETNs.

You've Got a HOLDR to Cry On.

Exchange-Traded Notes.

Commodity-Based ETVs.

Money Makes the World Go 'Round.

Summary.

Chapter 9: Putting the "Trade" in Exchange-TradedFunds.

Discount Brokers.

The Actual Trade.

Going Long to Go Short.

Options on ETFs.

Summary.

Chapter 10: Building Your Own ETF Portfolio.

The Simplest Portfolio.

Assessing Your Risk.

Strategic and Tactical Asset Allocation.

Foundation Portfolios.

Not Following the Herd.

Tax-Loss Harvesting.

Hiring an Investment Adviser.

Summary.

Chapter 11: The Future of ETFs.

The NYSE-Amex Merger.

Specialists and Seed Capital.

Actively Managed ETFs.

Entering the 401(k) Market.

In Conclusion.

Appendix: How to Decide Which ETFs Are Best for You.

Notes.

About the Author.

Index.

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