Investing with Exchange-Traded Funds Made Easy A Start-to-Finish Plan to Reduce Costs and Achieve Higher Returns

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ISBN: 9780132360098 | 0132360098
Cover: Hardcover
Copyright: 10/17/2008

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ETFs offer exceptionally low expenses, outstanding performance, and unparalleled transparency. With over 200 new ETFs added in just the last year, for typical investors, the variety is simply overwhelming. With this new edition one of the field's leading experts cuts through the ETF marketing hype, offering a start-to-finish plan for choosing the right ETFs, today and for years to come. Dr. Marvin Appel reveals what ETFs can and can't do, explains why they're not all equally attractive, and shows exactly how to use them to beat the market, year after year. Drawing on objective data and proven, back-tested strategies, Appel shows how to quickly move into the right ETFs at the right time, consistently staying on the winning side of major market trends. Appel starts by explaining how ETFs work, then illuminates every facet of ETF investing: quantifying potential risk and reward; using ETFs to improve diversification; implementing simple 'active strategies'; deciding when to move from ETFs into cash; and much more. This book includes a full chapter on international ETF investing, as well as the most clear-headed assessment of tax-oriented ETF investing ever written. From start to finish, this book candidly assesses risks, costs, and rewards - helping you become an informed ETF consumer, and an exceptionally effective ETF investor.

Acknowledgments	p. xv
About the author	p. xvii
Exchange-Traded Funds (ETFs): Now Individuals Can Invest Like the Big Players	p. 1
ETFs Are a Special Type of Mutual Fund	p. 2
ETFs Avoid the Expense of Fund Managers	p. 2
ETFs Are Traded on Exchanges	p. 4
ETF Investors Have Hidden Costs Through the Bid-Ask Spread	p. 7
The Creation/Redemption Process Keeps ETF Share Prices Close to the Market Value of the Underlying Shares	p. 16
ETF Performance Is Not Weighed Down by Transaction Costs	p. 21
ETF Shares Are Often More Tax-Efficient Than Mutual Funds	p. 21
Special Risks of ETFs	p. 22
Conclusion	p. 23
Endnotes	p. 24
The Multifaceted Stock Market: A Guide to Different Investment Styles	p. 25
The First Decision: Stocks, Bonds, or Cash	p. 26
Size Matters	p. 29
Each Investment Style Has Multiple ETFs	p. 34
Conclusion	p. 40
Endnotes	p. 40
A One-Step Strategy for Selecting Superior Investments: Indexing	p. 43
Investments That Track Market Indexes Have Outperformed Most Mutual Funds	p. 46
The Evidence in Favor of Indexing	p. 47
Indexing Has Delivered Greater Profits Than the Average Mutual Fund, Except in the Small-Cap Area	p. 49
How a Few Mutual Fund Managers Have Beaten the Indexes	p. 50
Conclusion	p. 52
Appendix to Chapter 3-Index Construction Methodologies	p. 53
Endnotes	p. 56
Investment Risk: A Visit to the Dark Side	p. 57
Drawdown-An Intitutive Measure of Investment Risk	p. 58
A 43-Year History of Bear Markets	p. 64
What if Your Investment Was Not Around During a Bear Market?	p. 70
Example of Risk Assessment: An Emerging Market ETF	p. 73
Market Risks and Planning for Your Future	p. 77
Where to Find Quantitative Investment Risk Information	p. 79
Calculation of Drawdown with a Spreadsheet	p. 79
Volatility of Past Returns as a Risk Measure	p. 83
Endnotes	p. 86
How Well Are Your Investments Really Doing? Risk-Adjusted Performance	p. 87
The First Risk-Adjusted Performance Measure-Annual Gain-to-Drawdown Ratio	p. 88
Another Risk-Adjusted Performance Measure-The Sharpe Ratio	p. 91
Risk-Adjusted Performance Review	p. 94
Conclusion	p. 96
Calculation of the Compounded Annual Rate of Return	p. 96
Calculation of the Sharpe Ratio	p. 98
Endnote	p. 101
Diversification: The Only Free Lunch on Wall Street	p. 103
Reduce Risk, Not Profits, with Diversification	p. 104
Diversification Versus Picking Only the Best	p. 106
How to Determine What Should Be in the Optimal Portfolio	p. 107
Example-Determining a Good Mix of Stocks and Bonds	p. 108
Interpretation of the Sharpe Ratio	p. 110
The Uncertainty of Future Investment Returns	p. 110
Conclusion	p. 113
Endnote	p. 113
The One-Decision Portfolio	p. 115
A Risk-Reducing Investment Mix	p. 116
Indexes Used to Test the One-Decision Portfolio	p. 119
Performance History for the One-Decision Portfolio	p. 119
The One-Decision Portfolio for Less Conservative Investors	p. 123
ETFs You Can Use to Create Your Own One-Decision Portfolio	p. 124
Rebalancing	p. 126
Why Are Only U.S. Investments Included in the One-Decision Portfolio?	p. 127
Conclusion	p. 128
Appendix to Chapter 7-A Brief Discussion of the Bond Market	p. 129
Endnotes	p. 133
When to Live Large: An Asset Allocation Model for Small- versus Large-Cap ETFs	p. 135
Why Market Capitalization Matters	p. 136
Trading Rules	p. 138
Results	p. 139
Real-World Implementation with ETFs	p. 142
Conclusion	p. 145
Appendix to Chapter 8-ETF Distributions and Taxes	p. 146
Boring Bargains or Hot Prospects? Choosing between Growth and Value ETFs	p. 151
The Concept of Relative Strength	p. 154
History of Relative Strength Changes between Growth and Value	p. 156
Recognizing the Emergence of a New Trend Using the Relative Strength Ratio	p. 161
Results with Small-Cap Value versus Growth	p. 165
Results with Large Cap Value versus Large Cap Growth	p. 168
Real-World Implementation with ETFs	p. 169
Conclusion	p. 171
When Is It Safe to Drink the Water? International Investing	p. 173
How to Identify Whether the Long-Term Trend Favors U.S. or Developed-Country Foreign Stocks	p. 179
Results of Using the EAFE/S&P 500 Asset Allocation Model	p. 182
Emerging Market ETFs-Investing for the Future	p. 185
Outlook for International Investing	p. 188
Conclusion	p. 189
What Bonds Can Tell You about Stocks: How to Use Interest Rates	p. 191
A Basic Introduction to the Bond Market	p. 192
Why Rising Interest Rates Have Usually (But Not Always) Been Bad for Stocks	p. 193
An Indicator of Rising Interest Rates	p. 196
Yield Curve Indicator	p. 197
Composite Interest Rate Indicator	p. 203
Conclusion	p. 205
It's a Jungle Out There: Selecting from Among Different ETFs with Similar Investment Objectives	p. 207
The Drawdown Chart-A New Tool	p. 208
Small-Cap ETFs	p. 211
Growth Versus Value ETFs	p. 214
Utility Sector ETFs	p. 218
Conclusion	p. 221
Endnotes	p. 222
The Ultimate ETF Investment Program for 30 Minutes per Month	p. 223
The Ultimate ETF Investment Program	p. 224
Results of the Ultimate ETF Strategy	p. 230
Conclusion	p. 231
ETF Strategies for Investment Income	p. 237
The Ideal Income Investment-A Payout That Grows over Time	p. 238
If You Want High Dividends, You Have to Like Financial Stocks	p. 239
Where to Find High-Dividend ETFs	p. 240
A Unique High-Dividend Portfolio	p. 243
Preferred Stock ETFs	p. 244
Conclusion	p. 248
The Hottest Investments Around: Commodity ETFs	p. 251
Primer on Commodity Investing	p. 254
Absentee Ownership of Precious Metals	p. 255
Become a Futures Trader	p. 257
A Virtual Commodity Investment	p. 260
How to Invest in Commodity ETFs	p. 261
The Outlook for Commodities	p. 263
Conclusion	p. 264
Internet Resources for ETF Investors	p. 267
ETF Sponsor Web Sites	p. 268
General ETF Web Sites	p. 269
Index Provider Web Sites	p. 270
Current and Historical Market Data Web Sites	p. 271
Fundamental Economic Data Web Sites	p. 272
Index	p. 273
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Investing with Exchange-Traded Funds Made Easy A Start-to-Finish Plan to Reduce Costs and Achieve Higher Returns

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Table of Contents

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