The first hands-on guide to tapping into the $335 billion ETF market
ETF Strategies and Tactics is an unprecedented guidebook covering the mechanics of ETFs, complete with approaches and techniques for hedging positions, preserving capital, and protecting assets from market volatility. There is no clearer or more practical resource for learning how use ETFs to hedge risk at low-cost than this profit-generating, one-stop resource.
Led by former chairman of the Chicago Mercantile Exchange, Laurence Rosenberg, the expert team of authors behind ETF Strategies and Tactics share valuable insight into:
- How ETFs work
- Unique characteristics of ETFs
- The people who trade ETFs
- The types of investors who own ETFs
- Advantages and disadvantages of ETFs
After providing such basics as how ETFs are developed, what types of indices are used, and the costs that determine returns, the authors arm you with the critical tools and information that will prove invaluable in day-to-day investing
Table of Contents
Acknowledgments xiii
Introduction xix
What Are ETFs, and What Makes Them Good
Investments? 1
What Is an ETF? 2
Origins of ETFs 2
Growth of the ETF Market 5
Product Varieties 6
Why Investors Are Embracing ETFs 7
ETFs Compared to Mutual Funds 11
The Investment Universe 12
Investment Companies 14
Expenses 26
Tax Efficiency 36
Similarities and Differences between Mutual Funds and ETFs 42
How ETFs Work 47
Buying and Selling ETFs: An Illustration 47
ETF Mechanism 49
Arbitrage and ETFs 51
Differences between Unit Investment Trusts and Open-End Companies 52
Grantor Trusts/HOLDRs 54
Actively Managed ETFs in the Future 57
ETF Regulation 61
ETFs and ETF Look-Alikes 62
Illustration of an ETF Look-Alike 64
Personnel Issues 66
Taxes 69
Regulations outside the United States 72
ETF Indexes 77
What Are Indexes? 77
Development of an Index 79
Index Diversity 82
Major Indexes Measured by ETFs 83
Tax Issues 85
The ETF Universe 89
ETF Investment Options 89
Classification by Capitalization 99
Broad Market Index 100
Funds Classified by Market Capitalization of Investments 101
Style 104
International Funds 109
Sector 114
Specialty Funds 122
Commodity 125
Currency 125
Fixed Income 126
Support and Resistance with Pivots 129
Pivot Points and ETFs 130
Moving Averages and ETFs 133
What about Swing Trading? 135
ETF Money Management 145
Margin-to-Equity Parameter 145
Short Selling: Securities and ETFs 153
Short Selling Securities 154
Short Selling ETFs 154
Hedging Your Portfolio 156
ETF Arbitrage and Spreading 159
Forms of Arbitrage 160
ETF Arbitrage 161
Advantages of Spreading 162
Identifying Arbitrage Opportunities 163
Options for ETFs 165
Four Basic Strategies 166
Option Terminology 167
Option Strategies 169
Evaluating ETFs 173
Price/Earnings Ratio 173
Price/Sales Ratio 174
Financial Ratios 175
Analyze the Company's Profitability 176
Getting the Research Done 180
ETFs and Market Activity 183
Read the Trends ... and That Includes ETFs 184
Trade in Terms of Probability 187
Design, Maintain, and Manipulate Your ETF Portfolio 191
Develop Your "Watch List" of ETFs 191
Export Your Portfolio into Excel 194
Maintain and Manipulate Your Portfolio 197
Two Significant Trading Strategies 199
European ETFs 203
Invest in European ETFs 204
ETF Choices 205
ETF Managers-Europe and the United States 205
Taxes 209
Regulation 210
Strategies 211
European Currency ETFs 211
Europe Is Not One Country 212
Eurozone Issues 212
ETF Practical Applications 223
Navigating Web Pages 224
Examine Typical ETF Screens 225
Herd Mentality 232
ETF Spreads 233
One-on-One Interviews: Leading ETF Providers 241
American Stock Exchange: The Birthplace of Exchange-Traded Funds 242
Dow Jones 246
iShares Germany 250
Keefe, Bruyette, and Woods (KBW) 256
MSCI BARRA 260
Van Eck Global 265
WisdomTree 268
XShares and HealthShares 275
U.S. ETFs and Trading Volume as of October 1, 2007 287
SPDR Strategies 313
Building a Customized and Diversified Equity Portfolio That Matches Your Specific Objective 313
Manage Risk through Asset Allocation by Sector 315
Rebalance Portfolio Based on Current Sector Weightings 317
Gain Diversified Access to Attractive Investment Themes 318
Enhance After-Tax Returns with Tax Swaps 319
Use ETF Flexibility to Hedge Concentrated Positions 320
Web Sites 323
www.finance.yahoo.com 323
www.etfguide.com 325
www.etfconnect.com 326
www.indexuniverse.com 327
www.finra.org 328
www.amex.com/etf/EtMain.jsp 330
www.fidelity.com 331
www.geckosoftware.com 333
www.investors.com/etf 333
www.lrosenberg.com 334
www.seekingalpha.com 335
www.cheatthestreet.com 336
www.vanguard.com 336
www.optionsxpress.com 337
Endnotes 339
Bibliography 347
Index 351