ETFs for the Long Run

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.

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

• Preface ixAcknowledgments xiiiChapter 1 Etfs—The Newfangled Mutual Funds 1How ETFs Stack Up against Mutual Funds 2Greater Flexibility 3Lower Fees 4More Tax Efficient 5Greater Transparency 6Precise Allocations 6Investment in Alternative Asset Classes 7One Caveat 7Summary 8Chapter 2 Etf History Lesson: How A New Type of Fund Was Born 11A Short History of the Amex 13The Father of the ETF 17Philly Strikes First 18Back to the Drawing Board 21Along Came a Spider 26The Birth of an Industry 27Let’s Do It Again 29What Tangled Webs We Weave 30Building a Business 33Shine On, You Crazy DIAmonds 34Arachnophobia? 35Wedding Bells 35The Biggest ETF Launch 37All in the Family 41The First Assault 45If You Can’t Beat ’Em, Join ’Em 46Builders and Bonds 47Free Again 49Chapter 3 The Evolution Of The Etf 51The Importance of a Broadly Diversified Portfolio 53The Appeal of Investment Companies 55Types of Investment Companies 56Types of Mutual Funds 58Running a Mutual Fund 60The Creation of an ETF 63Summary 67Chapter 4 Index Fund-Amentals 69Why an Index? 70Fund Management Options 72The Rise of the Index Funds 76The Big Index Companies 79Indexes from the Stock Exchanges 82Actively Managed ETFs 84Summary 84Chapter 5 Fee Bitten 87Wall Street Produces Vintages 87Looking for Low Management Fees 89Summary 92Chapter 6 the better mousetrap: how can etfs charge so little? 95Transparent Costs of Mutual Funds 96Hidden Costs of Mutual Funds 105The Creation Unit: How They Make ETFs So Cheap 110So Long, Transaction Costs 114So What Costs Do ETFs Have? 119Why Would I Ever Buy a Mutual Fund? 123Summary 127Chapter 7 The New Indexers 129Missed Opportunity 132Unfair Fight 136BONY Builds a BLDR 137The Name Is Bond 138Rydex Rides In 140Vanguard Makes a Splash 142There’s Power in Them There Shares 144Mutual Fund Scandal Helps ETFs 145PowerShares Becomes a Powerhouse . . . and Other Important Developments of 2005 147The Buy-Out 148Opening the Floodgates 149The Fundamentalists 155Grow, Baby, Grow 163Summary 168Chapter 8 The Etfs That Aren’t Etfs: Etps, Etvs, And Etns 171You’ve Got a HOLDR to Cry On 174Exchange-Traded Notes 176Commodity-Based ETVs 180Money Makes the World Go ’Round 199Summary 204Chapter 9 Putting The “Trade” In Exchange-Traded Funds 217Discount Brokers 219The Actual Trade 220Going Long to Go Short 226Options on ETFs 229Summary 232Chapter 10 Building Your Own Etf Portfolio 235The Simplest Portfolio 237Assessing Your Risk 237Strategic and Tactical Asset Allocation 241Foundation Portfolios 248Not Following the Herd 258Tax-Loss Harvesting 265Hiring an Investment Adviser 267Summary 269Chapter 11 The Future Of Etfs 273The NYSE-Amex Merger 274Specialists and Seed Capital 275Actively Managed ETFs 279Entering the 401(k) Market 281In Conclusion 283Appendix : How To Decide Which Etfs Are Best For You 285Notes 289About the Author 300Index 301