Exchange-Traded Funds For Dummies

Title Page
Copyright Page
Table of Contents
Introduction
	Since the First Edition. . .
		Out of the shadows
		Filling the investment voids
		Creations of dubious value
		Morphing into new creatures
	About This Book
	Foolish Assumptions
	Icons Used in This Book
	Beyond the Book
	Where to Go from Here
Part 1 The ABCs of ETFs
	Chapter 1 No Longer the New Kid on the Block
		In the Beginning
			Enter the traders
			Moving south of the border
		Fulfilling a Dream
			Goodbye, ridiculously high mutual fund fees
			Hello, building blocks for a better portfolio
			Will you miss the court papers?
		Not Quite as Popular as the Beatles, But Getting There
			Moving from Wall Street to Main Street
			Keeping up with the Vanguards
		Ready for Prime Time
			The proof of the pudding
			The major players
			Twist and shout: Commercialization is tainting a good thing
	Chapter 2 What the Heck Is an ETF, Anyway?
		The Nature of the Beast
		Choosing between the Classic and the New Indexes
		Preferring ETFs over Individual Stocks
		Distinguishing ETFs from Mutual Funds
		Why the Big Boys Prefer ETFs
			Trading in large lots
			Savoring the versatility
		Why Individual Investors Are Learning to Love ETFs
			The cost advantage: How low can you go?
			Uncle Sam’s loss, your gain
			What you see is what you get
		Getting the Professional Edge
			Consider a few impressive numbers
			You can do what they do!
		Passive versus Active Investing: Your Choice
			The index advantage
			The allure of active management
			Why the race is getting harder to measure. . .and what to do about it
		Do ETFs Belong in Your Life?
			Calculating commissions
			Moving money in a flash
			Understanding tracking error
			Making a sometimes tricky choice
	Chapter 3 Getting to Know the Players
		Creating an Account for Your ETFs
			Answering a zillion questions
			Placing an order to buy
			But wait just a moment!
			Trading ETFs like a pro
		Introducing the Shops
			What to look for
			Price is no longer key
			The Vanguard Group
			Fidelity Investments
			Charles Schwab
			E*Trade
			Other brokerage houses
		Presenting the Suppliers
			It’s okay to mix and match — with caution
			Check your passport
			BlackRock Financial Management iShares
			Vanguard ETFs
			State Street Global Adviser’s SPDRs
			Invesco
			Charles Schwab
			First Trust
			Other suppliers
		Familiarizing Yourself with the Indexers
			S&P Dow Jones Indices
			MSCI
			FTSE/Russell
			CRSP
			Bloomberg
		Meeting the Middlemen
			NYSE Arca
			NASDAQ
			BATS
		Meeting the Wannabe Middlemen
			Commissioned brokers
			Separately managed accounts
			Annuities and life insurance products
			Funds of funds
Part 2 Building the Stock (Equity) Side of Your Portfolio
	Chapter 4 Risk Control, Diversification, and Some Other Things You Need to Know
		Risk Is Not Just a Board Game
			The trade-off of all trade-offs (safety versus return)
			So just how risky are ETFs?
		Smart Risk, Foolish Risk
		How Risk Is Measured
			Standard deviation: The king of all risk measurement tools
			Beta: Assessing price swings in relation to the market
			The Sharpe, Treynor, and Sortino ratios: Measures of what you get for your risk
		Meet Modern Portfolio Theory
			Tasting the extreme positivity of negative correlation
			Settling for limited correlation
			Reaching for the elusive Efficient Frontier
			Accusations that MPT is dead are greatly exaggerated
		Mixing and Matching Your Stock ETFs
			Filling in your style box
			Buying by industry sector
			Don’t slice and dice your portfolio to death
	Chapter 5 Large Growth: Muscular Money Makers
		Style Review
			What makes large cap large?
			How does growth differ from value?
			Putting these terms to use
		Big and Brawny
			Contrary to all appearances. . .
			Let history serve as only a rough guide
		ETF Options Galore
			Winnowing the field
			Strictly large growth, best options
			ETFs I wouldn’t go out of my way to own
	Chapter 6 Large Value: Counterintuitive Cash Cows
		Six Ways to Recognize Value
		Looking for the Best Value Buys
			Taking the index route
			Making an ETF selection
	Chapter 7 Small Growth: Sweet Sounding Start-ups
		Getting Real about Small-Cap Investments
		Your Choices for Small Growth
			Strictly small-cap growth funds
		Smaller than Small: Meet the Micro Caps
	Chapter 8 Small Value: Diminutive Dazzlers
		It’s Been Quite a Ride
			Latching on for fun and profit
			But keeping your balance
		What About the Mid Caps?
	Chapter 9 Going Global: ETFs without Borders
		The Ups and Downs of Different Markets around the World
			Low correlation is the name of the game
			Remember what happened to Japan
		Finding Your Best Mix of Domestic and International
			Why putting three-quarters of your portfolio in foreign stocks is too much
			Why putting one-quarter of your portfolio in foreign stocks is insufficient
			Why ETFs are a great tool for international investing
		Not All Foreign Nations — or Stocks — Are Created Equal
		Choosing the Best International ETFs for Your Portfolio
			A number of brands to choose from
			All the world’s your apple: ETFs that cover the planet
			Developed-market ETFs: From the North Sea to the Land of the Rising Sun
			Emerging-market stock ETFs — Well, we hope that they’re emerging
			Adding value to your international portfolio
			Small-cap international: Yes, you want it
	Chapter 10 Sector Investing: ETFs According to Industry
		Selecting Stocks by Sector, not Style
		Speculating on the Next Hot Industry
			Sizzling and sinking
			Momentum riders and bottom feeders
		Doing Sector Investing Right
			Calculating your optimal sector mix
			Seeking risk adjustment with high- and low-volatility sectors
			Knowing where the style grid comes through
			Combining strategies to optimize your portfolio
			Seeking low correlations for added diversification
		Sector Choices by the Dozen
			Vanguard ETFs
			Select Sector SPDRs: State Street Global Advisors (Part 1)
			SPDRs: State Street Global Advisors (Part 2)
			BlackRock’s iShares
			Invesco
			Fidelity
	Chapter 11 Real Estate Investment Trusts: Becoming a Virtual Landlord
		Considering Five Distinguishing Characteristics of REITs
			Limited correlation to the broad markets
			Unusually high dividends
			Different taxation of dividends
			Special status among financial pros
			Connection to tangible property
		Calculating a Proper REIT Allocation
			Judging from the past
			Splitting the baby: Domestic and international REIT funds
		Picking REIT ETFs for Your Portfolio
			U.S. domestic REIT ETFs
			International and Global REIT funds
	Chapter 12 Dividend Funds: The Search for Steady Money
		Your High-Dividend ETF Options
		Promise of Riches or Smoke and Mirrors?
Part 3 Adding Bonds (Fixed Income) to Your Portfolio
	Chapter 13 For Your Interest: The World of Bond ETFs
		Bond Investing in the Modern Era
		Tracing the Track Record of Bonds
			Portfolio protection when you need it most
			History may or may not repeat
		Tapping into Bonds in Various Ways
			Finding strength in numbers
			Considering bond investment costs
		Determining the Optimal Fixed-Income Allocation
			60/40? 50/50? Finding a split that makes sense
			Meet Joe, age 67, with $840,000 in the bank
			Meet Betsy and Mike, age 36, with $30,000 in the bank
	Chapter 14 Your Basic Bonds: Treasuries, Agency Bonds, and Corporates
		Tapping the Treasuries: Uncle Sam’s IOUs
			Schwab Short-Term U.S. Treasury ETF (SCHO)
			Vanguard Short-Term Treasury ETF (VGSH)
			Vanguard Intermediate-Term Treasury Index ETF (VGIT)/Schwab Intermediate-Term U.S. Treasury (SCHR)
			Schwab Long-Term U.S. Treasury ETF (SCHQ)/Vanguard Long-Term Treasury ETF (VGLT)
		Bread at $15 a Loaf? Getting Inflation Protection in a Flash
			Schwab U.S. TIPS ETF (SCHP)
			Vanguard Short-Term Inflation-Protected Securities Index Fund (VTIP)
		Treasuries’ Cousins: U.S. Agency Bonds (Mortgage-Backed Securities)
		Banking on Business: Corporate-Bond ETFs
			Vanguard Intermediate-Term Corporate Bond ETF (VCIT)
			Vanguard ESG U.S. Corporate Bond ETF (VCEB)
			Vanguard Short-Term Corporate Bond Index (VCSH)
		The Whole Shebang: Investing in the entire U.S. Bond Market
			BNY Mellon Core Bond ETF (BKAG)
			Vanguard Total Bond Market (BND)
			Vanguard Short-Term Bond (BSV)
	Chapter 15 Moving Beyond Basics into Municipal and Foreign Bonds
		Municipals for Mostly Tax-free Income
			Take a tour of 50 states
		Foreign Bonds for Fixed-Income Diversification
			Vanguard Total International Bond (BNDX)
			iShares International Treasury Bond ETF (IGOV)
			SPDR FTSE International Government Inflation-Protected Bond ETF (WIP)
			Invesco International Corporate Bond ETF (PICB)
		Emerging-Market Bonds: High Risk, High Return
			Vanguard Emerging Markets Government Bond (VWOB)
			SPDR Bloomberg Barclays Emerging Markets USD Bond ETF (EMHC)
			iShares J.P. Morgan USD Emerging Markets Bond Fund (EMB)
Part 4 Specialized ETFs
	Chapter 16 All That Glitters: Gold, Silver, and Other Commodities
		Gold, Gold, Gold!
			Midas touch or fool’s gold?
			A vastly improved way to buy the precious metal
			The tax man cometh
		Silver: The Second Metal
			Quick silver on the move
			If you must . . .
		Oil and Gas: Truly Volatile Commodities
			Oily business
			No experience necessary
			The sad saga of contango
			Taxing your tax advisor
		(Somewhat) Safer Commodity Plays
			General commodity index funds
			Actively managed, or quasi-actively managed, commodity funds
			Awaiting new developments
		Playing the Commodity Market Indirectly
			Tapping into commodity companies
			Tapping into commodity-rich countries
	Chapter 17 Investing for a Better World
		What Are “Sustainable Investing” and “ESG”?
			Sustainable investing is sometimes filled with ambiguity
			Are companies with better ESG ratings more profitable?
			Is ESG investing creating a better world?
			Will investing in ESG funds make you rich?
			Fence-sitters, make a decision
		Which Sustainable ETFs Are Best for Your Portfolio?
			Engine No. 1 Transform 500 ETF (VOTE)
			Xtrackers (Deutsche Bank) S&P SmallCap 600 ESG ETF (SMLE)
			Nuveen ESG International Developed Markets Equity (NUDM) and Nuveen ESG Emerging Markets Equity (NUEM)
			Humankind U.S. Stock ETF (HKND)
			VanEck Vectors Green Bond (GRNB)
			KraneShares Global Carbon ETF
	Chapter 18 Going Active with ETFs
		Not Exactly Setting the World on Fire
		Do You Want to Get Active?
		Let’s Get Practical
		A Look at Some of the Most Popular Actively Managed ETFs
			ARK Innovation ETF (ARKK)
			JPMorgan Ultra-Short Income ETF (JPST)
			PIMCO Enhanced Short Maturity Active ETF (MINT)
			Quadratic Interest Rate Volatility and Inflation Hedge ETF (IVOL)
			First Trust Long/Short Equity ETF (FTLS)
			KraneShares Global Carbon ETF (KRBN)
		Time to Swap Out Your Active Mutual Funds?
	Chapter 19 All-In-One ETFs: For the Ultimate Lazy Portfolio
		Buying into the World’s Stock Markets in a Flash
			Vanguard Total World Stock ETF (VT)
			SPDR Portfolio MSCI Global Stock Market ETF (SPGM)
		Putting the World’s Bond Markets at Your Fingertips
			Vanguard Total World Bond ETF (BNDW)
			iShares Global Green Bond ETF (BGRN)
		Buying Stocks and Bonds in One Shot
			iShares asset allocation funds
			State Street Global Advisors SPDRs: Three asset allocation options
			Invesco’s actively managed “target-risk” ETFs
			Multi-asset funds that change as you age
			Russell’s average review for the average reader on an average day
	Chapter 20 Proceed-with- Caution ETFs
		Funds That (Supposedly) Thrive When the Market Takes a Dive
			Entering an upside-down world
			Boasting a track record like none other
		Funds That Double the Thrill of Investing (for Better or Worse)
			Crazy math: Comparing leveraged funds to traditional ETFs
			The continuing sad saga of DIG and DUG
			“Buffer” or “Defined-Outcome” ETFs
		Alphabet Soup: MLPs, SPACs, and IPOs
		Investing in one-horse towns
		Get Rich (or Not) in Crypto- or Other Currencies!
		Take a Whiff of These Cannabis ETFs
		Copycat ETFs
Part 5 Putting It All Together
	Chapter 21 Sample ETF Portfolio Menus
		So, How Much Risk Can You Handle and Still Sleep at Night?
			A few things that just don’t matter
			The irony of risk and return
			The 25x rule
			Other risk/return considerations
			The limitations of risk questionnaires
		Keys to Optimal Investing
			Incorporating Modern Portfolio Theory into your investment decisions
			Minimizing your costs
			Striving for tax efficiency
			Timing your investments (just a touch)
		Finding the Perfect Portfolio Fit
			Considering the simplest of the simple
			Racing toward riches: A portfolio that may require a crash helmet
			Sticking to the middle of the road
			Taking the safer road: Less oomph, less swing
	Chapter 22 Exercising Patience: The Key to Any Investment Success
		The Tale of the Average Investor (A Tragicomedy in One Act)
			Returns that fall way short of the indexes
			ETFs can make failure even easier!
			The lure of quick riches
		The Value Line Paradox
			Paper versus practice
			The lesson to be learned
		“Investment Pornography” Everywhere
			Welcome to the wild, wacky world of investment advice
			YouTube: Where teenagers in baseball caps explain the “secrets” of ETF trading
		Patience Pays, Literally
			Talk about unpredictability
			A short history of the market’s resiliency
	Chapter 23 Exceptions to the Rule (Ain’t There Always)
		Rebalancing to Keep Your Portfolio Fit
			How rebalancing works
			How often to rebalance
			Rebalancing for retirees
		Contemplating Tactical Asset Allocation
			Understanding the all-important P/E ratio
			Applying the ratio to your portfolio
			Buying unloved assets
		Harvesting Tax Losses, and the IRS’s Oh-So-Tricky “Wash Rule”
			What the heck is “substantially identical” anyway?
		Revamping Your Portfolio with Life Changes: Marriage, Divorce, and Babies
			Betsy and Mark: A fairly typical couple
			One year later
			Yet one year later
		Are Options an Option for You?
			Understanding puts and calls
			Using options to make gains without risk
			Insuring yourself against big, bad bears
			Seeming almost too good to be true
			Weighing options strategies against the diversified ETF portfolio
			Factoring in time and hassle
	Chapter 24 Using ETFs to Fund Your Fun (Retirement) Years
		Aiming for Economic Self-Sufficiency
			Taking the basic steps
			Choosing the right vessels
		Curing the 401(k) Blues
			Lobbying the benefits manager
			The Roth 401(k)
		Strategies for the Self-Employed
			The traditional IRA versus the Roth IRA
			Taxes now or taxes later?
		Ushering Your Portfolio into Retirement Readiness
			15+ years and counting
			Less than 15 years to retirement
		Withdrawing Funds to Replace Your Paycheck
			Don’t obsess over maintaining principal or drawing from dividends
			Take your minimum required distributions
			IRA, 401(k), or regular (taxable) brokerage account: Which to tap first?
	Chapter 25 Marrying ETFs and Non-ETFs to Make an Optimal Portfolio
		Tinkering with an Existing Stock or Mutual Fund Portfolio
			Improving your diversification
			Minimizing your investment costs
			Using ETFs to tax harvest
		Looking Beyond the Well-Rounded ETF Portfolio
			Adding mutual funds: The most popular of all investment vehicles
			Adding I Bonds: An Uncle Sam bond with a twist
			Do Consider Annuities, Preferably Fixed
Part 6 The Part of Tens
	Chapter 26 Ten FAQs about ETFs
		Are ETFs Appropriate for Individual Investors?
		Are ETFs Risky?
		Do I Need a Financial Professional to Set Up and Monitor an ETF Portfolio?
		How Much Money Do I Need to Invest in ETFs?
		With Hundreds of ETFs to Choose From, Where Do I Start?
		Where Is the Best Place for Me to Buy ETFs?
		Is There an Especially Good or Bad Time to Buy ETFs?
		Do ETFs Have Any Disadvantages?
		Does It Matter Which Exchange My ETF Is Traded On?
		Which ETFs Are Best in My IRA, and Which Are Best in My Taxable Account?
	Chapter 27 Ten Mistakes Most Investors (Even Smart Ones) Make
		Paying Too Much for an Investment
		Failing to Properly Diversify
		Taking on Inappropriate Risks
		Selling Out When the Going Gets Tough
		Paying Too Much Attention to Recent Performance
		Not Saving Enough for Retirement
		Having Unrealistic Expectations of Market Returns
		Discounting the Damaging Effect of Inflation
		Not Following the IRS’s Rules
		Failing to Incorporate Investments into a Broader Financial Plan
	Chapter 28 Ten Forecasts about the Future of ETFs and Personal Investing
		ETF Assets Will Continue to Grow. . . for Better or Worse
		More Players May Enter the Field, but Only a Few
		Investors Will Get Suckered into Buying Packaged Products
		ETF Investors Will Have No Need for Anything but ETFs
		The Markets Will (Unfortunately) See Greater Correlation than in the Past
		Asset Class Returns Will Revert toward Their Historic Means
		Taxes Will Rise
		Inflation Will Remain Tame
		Private Pensions (of Sorts) May Emerge from the Rubble
		Hype Will Prevail!
Part 7 Appendixes
	Appendix A Great Web Resources to Help You Invest in ETFs
		Independent, ETF-Specific Websites
		Websites of ETF Providers
			The seven biggies
			Some of the lesser players
		Financial Supermarkets
		Stock Exchanges
		Specialty Websites
		Regulatory Agencies
		The People Who Create the Indexes
		Good Places to Go for General Financial News, Advice, and Education
		Yours Truly
	Appendix B Glossary
Index
EULA