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




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

Richard A. Ferri

ISBN: 978-0-470-53746-6 September 2009 400 Pages


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.

Foreword ix

Acknowledgments xiii

Introduction xv


Chapter 1 ETFs from Evolution to Revolution 3

Chapter 2 The Nuts and Bolts of ETFs 23

Chapter 3 Types of Exchange-Traded Portfolios 41

Chapter 4 ETF Benefits and Drawbacks 57

Chapter 5 Actively Managed ETFs 73


Chapter 6 Benchmark Indexes and Strategy Indexes 81

Chapter 7 Index Strategy Boxes 93

Chapter 8 Index Security Selection 107

Chapter 9 Index Security Weighting 127


Chapter 10 Broad U.S. Equity and Style ETFs 149

Chapter 11 Global Equity ETFs 171

Chapter 12 Industry Sector ETFs 189

Chapter 13 Special Equity ETFs 209

Chapter 14 Fixed Income ETFs 231

Chapter 15 Commodity and Currency ETFs 247


Chapter 16 Portfolio Management Strategies 269

Chapter 17 Passive ETF Portfolios 277

Chapter 18 Life Cycle Investing 293

Chapter 19 Active Portfolio Management with ETFs 307

Chapter 20 Special Portfolio Strategies 325

Chapter 21 Operational Tips for ETF Investors 335

Appendix A Index Strategy Box Abbreviation Guide 347

Appendix B ETF Resource List 349

Glossary 353

Index 367

About the Author 376