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Exchange Traded Funds: New and Classic Indexes
Some of the exchange-traded fund (ETF) providers (Vanguard, iShares, Schwab) tend to use traditional indexes, such as the Dow Jones Industrial Average. Others [more…]
Why the Big Boys Prefer Exchange-Traded Funds
When exchange-traded funds (ETFs) were first introduced, they were primarily of interest to institutional traders — insurance companies, hedge fund people, banks — who often have investment needs considerably [more…]
Basic Trade Choices for Exchange-Traded Funds
Buying and selling an exchange-traded fund (ETF) is just like buying and selling a stock; there really is no difference. Although you can trade in all sorts of ways, the vast majority of trades fall into [more…]
Cost Advantage of Exchange-Traded Funds
Some of the many advantages of exchange-traded funds (ETFs) include low costs, tax efficiency, transparency (you know what you’re buying), and the long track record of success for indexed investments. [more…]
An Unfair Race: Why Exchange-Traded Funds are Cheaper
The management companies that manage exchange-traded funds (ETFs), such as BlackRock, Inc. and Invesco PowerShares, are presumably not doing so for their health. No, they’re making a good profit. One reason [more…]
Tax Advantages of Exchange-Traded Funds
Before there were exchange-traded funds (ETFs), individual securities had a big advantage over funds in that you were required to pay capital gains taxes only when you actually enjoyed a capital gain. [more…]
ETFs and Risk: Use Limited Correlation to Reduce Portfolio Risk
In order to put together an ETF portfolio that maximizes your return while minimizing the risk, it is helpful to understand the concept of limited or low correlation. [more…]
Exchange-Traded Fund Structure and Taxes
The structure of exchange-traded funds (ETFs) makes them different than mutual funds. Actually, ETFs are legally structured in three different ways: as exchange-traded open-end mutual funds, exchange-traded [more…]
Transparency in Exchange-Traded Funds
A key to building a successful portfolio that includes exchange-traded funds (ETFs), right up there with low costs and tax efficiency, is diversification. You cannot diversify optimally unless you know [more…]
How to Get the Professional Edge with Exchange-Traded Funds
The difference between investment amateurs and investment professionals can be huge. But you can close much of that gap in investing with exchange-traded funds [more…]
The Advantage of Indexed Exchange-Traded Funds
The superior returns of indexed mutual funds and exchange-traded funds (ETFs) over actively managed funds have had much to do with the popularity of ETFs to date. Index funds [more…]
The Allure of Actively-Managed Exchange-Traded Funds
On March 25, 2008, Bear Stearns introduced an actively managed exchange-traded fund (ETF): the Current Yield ETF (YYY). As fate would have it, Bear Stearns was just about to go under, and when it did, [more…]
The Challenge of Measurement: ETFs vs. Mutual Funds
Unfortunately, the old-style “active versus passive” studies that consistently gave passive (index) investing, including exchange-traded funds (ETFs), two thumbs up are getting harder and harder to do. [more…]
Do ETFs Belong in Your Portfolio?
On the plus side of exchange-traded funds (ETFs) there are ultra-low management expenses, super tax efficiency, transparency, and a lot of fancy trading opportunities, such as shorting, if you are so inclined [more…]
Market Flash Crash: How to Safeguard Your ETFs
On May 6, 2010, the stock market went kablooey. With no real reason to explain it, the stock market suddenly plunged. Some exchange-traded funds (ETFs) had fallen in value to mere pennies on the dollar [more…]
ETFs and Mutual Funds: A Sometimes Tricky Choice
Say you have a choice between investing in an index mutual fund that charges 0.15 percent a year and an exchange-traded fund (ETF ) that tracks the same index and charges the same amount. [more…]
How Risky Are ETFs?
Asking how risky, or how lucrative, ETFs are is like trying to judge a soup knowing nothing about the soup itself, only that it is served in a blue china bowl. The bowl — or the ETF — doesn’t create the [more…]
Exchange Traded Funds: Systemic and Nonsystemic Risk
In the case of indexed ETFs and mutual funds, safety is provided (to a limited degree only!) by diversification in that they represent ownership in many different securities. Owning many stocks, rather [more…]
ETFs and Risk Measurement: Standard Deviation
Standard deviation shows the degree to which a stock/bond/mutual fund/ETF’s actual returns vary from its average returns over a certain time period.
For example, imagine two hypothetical ETFs and their [more…]
ETFs and Risk Measurement: Beta Assesses Price Swings Relative to Market
Beta is a relative measure of volatility for your ETF investment. It is used to measure the volatility of something in relation to something else. Most commonly that “something else” is the S&P 500. Very [more…]
ETFs and Risk Measurement: Sharpe, Treynor, and Sortino Ratios
The Sharpe, Treynor, and Sortino ratios are measures of what you get for the risk in any given ETF investment or any other type of investment, for that matter. [more…]
ETFs and Risk Measurement: Modern Portfolio Theory
How well any specific ETF fits into a portfolio — and to what degree it affects the risk of a portfolio — depends on what else is in the portfolio. This concept is called [more…]
Exchange-Traded Funds: The New Kid on the Block
In a world of very pricey investment products and very well paid investment-product salespeople of Wall Street, exchange-traded funds (ETFs) are the ultimate financial killjoys. [more…]
Advantages of Exchange-Traded Funds
Exchange-traded funds (ETFs) were first embraced by institutions, and they continue to be used big-time by banks and insurance companies and such. Institutions sometimes buy and hold ETFs, but they are [more…]
Exchange Traded Funds: From Wall Street to Main Street
With all that exchange-traded funds (ETFs) have going for them, it’s not surprising that they have spread like wildfire on a hot day in July. From the beginning of 2000, when there were only 80 ETFs on [more…]
