The Exchange-Traded Funds Manual
Gary L. Gastineau
Format: PDF / Kindle (mobi) / ePub
Full coverage of ETF investments from an expert in the field
The initial edition of Gary Gastineau's The Exchange-Traded Fund Manual was one of the first books to describe and analyze ETFs. It made the case for the superiority of the structure of investor-friendly ETFs over mutual funds and helped investors select better funds among the ETFs available.
With this new edition, Gastineau provides comprehensive information on the latest developments in ETF structures, new portfolio variety, and new trading methods. With a realistic evaluation of today's indexes, Gastineau offers insights on actively managed ETFs, improved index funds, and fund and advisor selection.
- Discusses how to incorporate ETFs into an investment plan
- Offers updated coverage of new ETFs, including full-function actively managed ETFs, and a valuable chapter on trading ETFs
- Written by the leading authority on exchange traded funds
Exchange-traded funds offer you diversification and participation in markets and investment strategies that have not been available to most investors. If you want to understand how to use ETFs effectively, the Second Edition of The Exchanged-Traded Fund Manual can show you how.
conﬁned to works mentioned in the text or in footnotes. Many of these references are worth your attention if you want to go deeper into a topic. Some ETF topics that are subjects of extensive current discussion are (1) actively managed and other non-transparent exchange-traded funds, (2) securities structures similar to open-end exchange-traded notes that can eliminate most counterparty credit risk and (3) ways to reduce the cost of trading exchange-traded products. The next few years will also
not be a reliable indicator of future results, but it is not meaningless. These studies do not contradict Bill Sharpe’s tautology that fund managers in the aggregate cannot beat the performance of a reasonably constructed representative stock market index—but, for one thing, you can’t invest directly in an index. These studies simply indicate (1) that active management is not necessarily the futile effort it is sometimes said to be, and (2) that it is possible to pick better managers. Active
of other cost issues. If a fund is paying more than, say, $0.04 per share or if the fund is making formal “soft dollar” commission payments for research or other services, the commissions almost certainly cover much more than the cost of trade executions.18 In most cases, investors would be better off compensating the manager directly through a higher advisory fee rather than through higher commissions that are used to pay some of the manager’s expenses. Information to help you—or a fund
benchmark that does not match the fund’s actual investment style. This mismatch often enables the fund to enjoy more investment inﬂows when it beats its inappropriate benchmark than the outﬂows that come from underperforming. The combination of Cremers and Petajisto (2009) and Sensoy (2008) suggests that a useful metric for a fund service to provide would be an Active Share calculation relative to an assortment of indexes to help investors identify true active managers and mismatched benchmarks.
is different from traditional ETF trading. NAV-based trading supplements the risk and position management model a market maker uses when trading in traditional intraday ETF markets. The interaction between a continuous auction market at intraday prices and NAV-based secondary market trading can signiﬁcantly reduce market maker costs and enrich the market maker’s opportunities for risk management. 4 As Chapter 8 describes, market-on-close (MOC) orders to buy or sell ETFs often deliver executions