Library

Published on by on March 10, 2009 | Updated May 15, 2013

The ETFdb Library is geared towards new investors and investors who are just getting started with ETFs.

Additional ETF Resources

The ETF Database team has scoured the Web to assemble the most informative and important information on ETF investing from various issuers, analysts, and economists. Jump to one of the following categories:

The Fundamentals of ETFs from WisdomTree.com

Equity ETFs are baskets of investments that represent a diversified group of companies (just like mutual funds). The ETF, however, trades like ordinary stocks on a stock exchange throughout the day. Since the funds generally track an index and trade regularly, they tend to have lower costs than mutual funds and are usually more transparent.

Exploring ETFs from iShares.com

This visual presentation provides an overview of ETFs, including the structure of the products, highlights of index investing, and portfolio strategies.

ETF Basics from Fidelity.com

This feature gives a brief overview of ETFs, including how they work, potential advantages, and risks to be aware of.

Advanced ETF Investing

De-Mystifying ETF Liquidity—What Does Volume Really Tell You? at egshares.com

Many investors are worried about investing in low-liquidity ETFs, fearing that the small trading volumes will prevent them from being able to sell when the time is right. However, this is an unfounded worry since the authorized participant is contractually obligated to take back the shares as close to the intraday indicative value as possible, which is the value of the basket that is posted every 15 seconds. This allows market makers to be sure that they will be able to sell their shares back to the issuing company. Hopefully, this little known fact will set investors’ minds at ease when investing in low volume ETFs.

Impact Of ETFs On Financial Advisory Industry at SPDRs.com

Thanks to a recent survey of investment professionals, it is clear that ETFs have hit the mainstream. More than 75% of those surveyed said that they use ETFs ‘lightly’ or moderately’ with 12% saying that more than half of their assets are in ETFs. In addition, two-thirds of responders said that ETFs were ‘the most innovative financial product of the past two decades.’

Accounting For Taxes: Turning To ETFs to Help Manage Your Bottom Line at Claymore.com

ETFs offer investors a tax-efficient vehicle that is far more efficient than mutual funds. This is due to the structure of ETFs which tend to produce lower turnover and simultaneously limit shareholder redemptions to in-kind transfers. Both turnover and redemptions lead to security sales which tend to trigger a tax event. By limiting these two issues taxes are kept as low as possible for all investors.

Leveraged and Inverse ETFs

Understanding Impact of Changing Market Exposure of Leveraged ETFs from DirexionShares.com

Leveraged ETFs are unique and potentially volatile investments that should be understood clearly before investing. This brochure provides insight into leveraged ETF fund composition and management process and discusses the risks associated with them.

The Effect of Time, Trend, Volatility, and Leverage on Relative Returns from DirexionShares.com

This academic paper by William J. Trainor Jr., Ph.D., CFA at East Tennessee State University, is a study on the effect of time, return trend, volatility, leverage ratio, and the rebalancing period on leverage Exchange Traded Funds’ (ETFs) returns relative to the underlying index.

Understanding Taxable Distributions from DirexionShares.com

In relation to traditional ETFs, leveraged index ETFs are generally less tax efficient due to inherent need for daily rebalancing in response to daily market movements. However, most leveraged ETF investors do not think about distributions the same way investors with a long-term ‘buy-and-hold’ mindset do.

The Universal Effects of Compounding and Leveraged Funds from ProShares.com

This two-page feature discusses the mathematical concepts behind compounding of returns and explains how these principles can impact returns generated by leveraged ETFs.

Components of Leveraged and Inverse Funds from ProShares.com

This feature takes a look under the hood of leveraged and inverse funds, explaining the strategies employed to achieve daily leveraging.

Rebalancing Leveraged and Inverse Fund Positions from ProShares.com

This articles discusses strategies for monitoring and rebalancing positions in leveraged and inverse funds, and explains why such a strategy may be used. For anyone considering a position in leveraged or inverse ETFs for more than one trading session, this piece is a must read.

Emerging Markets ETFs

Emerging Markets ETF Center

This resource includes information on emerging markets ETFs, including insights on country classifications, small cap and pure play alternatives, and sector-specific investing.

Why Invest In China? at SPDRs.com

The Chinese economy has weathered the recent economic turmoil very well and its per year GDP growth continues to approach double-digits. This quick rebound is thanks in large part to the Chinese stimulus program which will pump billions into infrastructure projects which will help to decrease transport times and hopefully increase domestic consumption, which remains the long term key for Chinese growth.

ETFs vs. Mutual Funds

Mutual Funds vs. Exchange-Traded Funds at Fool.com

This article breaks down the differences between ETFs and mutual funds from several different perspectives, including dividend differences, trading tactics, and more.

ETFs vs. Mutual Funds at ETFdb.com

This feature highlights five critical differences between ETFs and mutual funds, and announces on clear winner.

Mutual Fund or ETF: Which Is Right For You? at Forbes.com

This article examines the benefits and drawbacks of ETFs and mutual funds, identifying opportunities and potential areas of concern for all types of investors.

Fixed Income ETF Investing

The Savvy Investor’s 2-Minute Guide To Fixed Income Investing from iShares.com

There are currently more dollars invested in bonds than equities yet most investors know relatively little about the $29.5 trillion bond market. This is unfortunate because the market has changed greatly with the advent of agency bonds, MBS, and other more exotic instruments which enable investors to lower the volatility of portfolios with assets that are generally uncorrelated to equity markets.

The Investment Case for High-Yield Municipal Bonds from VanEck.com

High-yield munis are often issued by not-for-profit organizations such as hospitals, nursing homes, private colleges and charter schools, working in concert with public authorities, or by lower-rated governmental entities. In addition to offering tax-free income, these securities have relatively low default rates and offer investors a higher return than can be expected from a traditional municipal bond fund.

The Investment Case for Pre-Refunded Municipal Bonds from VanEck.com

The highest credit quality municipal bonds are known as Pre-Refunded issues. These bonds are refinanced by their issuers and remain outstanding in the marketplace. This is accomplished by issuing so-called refunding bonds whose proceeds are used to buy securities that are placed in escrow and dedicated to paying the interest and principal on the original issue. The securities in escrow are generally obligations that are directly issued or unconditionally guaranteed by the U.S. government which helps to lower the risk of the municipal bonds. Due to this securities in escrow, Pre-Refunded muni bonds are often considered the safest municipal bond investment available to investors.

Why Invest In TIPs at SPDRs.com

Like traditional Treasury bonds, TIPS pay coupon interest semi-annually. Unlike traditional Treasury bonds, however, the principal of a TIPS bond moves in parallel with inflation, and is continually adjusted to reflect changes in inflation over the life of the security. As the CPI fluctuates due to inflation, TIPS adjust monthly to reflect those changes. Since inflation rates tend to increase, these adjustments are generally positive, but they could be negative in the event that the CPI declines. These securities allow investors to obtain government bond exposure while keeping an eye on inflation concerns as well.

Muni Bond ETFs: A Match Made in Tax Exempt Heaven at SPDRs.com

Muni Bond ETFs allow investors to preserve their capital and lower their tax bill since most munis are exempt from federal taxes. Muni bond funds also allow investors to achieve greater diversification levels while maintaining higher level of liquidity and transparency than in non ETF bond funds. All SPDR muni bond ETFs are AMT exempt which further helps investors in high tax brackets.

Currency ETF Investing

The Case For Currency Income ETFs from WisdomTree.com

Currency income ETFs allow investors to access markets that were once only offered to retail investors and large, multinational banks. One of their greatest strengths is their ability to offer higher yield potential around the globe including three countries that offer rates higher than 3.5%. These funds also tend to be highly uncorrelated to American equities and can provide investors with a way to profit in a falling U.S. dollar environment.

Commodity ETF Investing

Real Assets: Inflation Protection Solutions with Exchange Traded Products from StateStreetSPDRs.com

Since 1929, the United States has only experienced 6 years of year-over-year deflation with the most recent coming more than 55 years ago. This suggests that investors should be much more worried about inflation rather than deflation as a threat to their portfolios. The best defense against inflation is often real assets which tend to outperform stocks and bonds in a rising inflation environment.

Gold as a Tactical Inflation Hedge and Long-Term Strategic Asset from StateStreetSPDRs.com

Although gold is often seen as an inflation hedge it can be a valuable long-term addition to any portfolio as well. In a comparison of four inflation hedges (gold, the S&P 500, TIPs, and REITs) gold outperformed, posting an annualized real return more than 200 basis points higher than any of the other hedges over a period from 1997 to mid 2009.

Enhanced Index ETFs

Fundamental Index ETFs Investor Guide from InvescoPowerShares.com

Some investors see price and market-capitalization weighted techniques as an outdated way to obtain a portfolio allocation. For these investors, PowerShares recommends considering ‘fundamental weighted indexes’ which use sales, cash flow, book value, and dividends in order to obtain a weighting. They believe that by using multiple metrics a more accurate allocation can be obtained and many of the price bubbles that come with market capitalization weighted funds can be avoided.

Quantitative Strategies ETFs Investor Guide from InvescoPowerShares.com

Quantitative Strategy ETFs seek to use active management strategies in order to accomplish a goal. These funds will either seek to obtain lower levels of volatility or higher returns by using more complicated strategies such as buy/write portfolios or long/short strategies. PowerShares then discusses its wide variety of quantitative strategy funds and what techniques they each use in their attempts to offer investors a better risk/reward profile.