ETF Database » IYY

Five Critical Questions To Ask When Investing In ETFs

Michael Johnston — Thu, 11 Feb 2010 08:00:58 +0000

ETFs have surged in popularity in recent years in part because of the numerous advantages they offer over traditional actively-managed mutual funds: lower costs, potential tax efficiencies, intraday trading, and enhanced transparency. But ETFs aren’t without potential drawbacks of their own. Although most funds appear relatively simple on the surface, there are some rather complex nuances as well. Below, we highlight five important questions for investors looking to avoid potential pitfalls and maximize efficiency of ETF portfolios (for more tips on ETF investing, sign up for our free ETF newsletter). 1. What Are The Underlying Assets? This sounds like a relatively simple question to ask, but I’d be willing to bet that there are a fair number of ETF investors who don’t understand exactly what they’re buying when they invest in certain exchange-traded products. This is most likely to happen with two types of products in particular: exchange-traded notes (ETNs) [...]

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Five Ways To Slash Your ETF Expenses

Eric Dutram — Thu, 10 Dec 2009 06:30:05 +0000

The reasons for the incredible rise of the ETF industry are numerous. Intra-day trading, enhanced transparency, and efficient tax features are all features that investors, individual and institutional alike, have embraced in record numbers. But perhaps the main reason why ETFs have attracted hundreds of billions of dollars in assets in recent years is the competitive cost structure they offer relative to traditional actively-managed mutual funds. Investors frustrated with the inability of most active managers to consistently beat their benchmark have been fleeing mutual funds in record numbers, embracing indexing as a strategy and ETFs as a preferred investment vehicle. But investing in ETFs doesn’t necessarily mean that investment expenses are kept to a minimum. Expense ratios among ETFs can vary significantly, and several of the most popular ETFs charge more than twice the fees of otherwise similar products. Reducing a portfolio’s weighted-average expense is a relatively easy task that [...]

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Schwab ETFs Could Be A Gamechanger

Michael Johnston — Tue, 03 Nov 2009 07:00:18 +0000

Charles Schwab, one of the country’s largest asset managers with more than $200 billion in assets under management, has made quite an entrance into the ETF arena. The San Francisco-based company announced the launch of its first eight exchange-traded funds, including four that will begin trading on Tuesday. Each of the exchange-traded products from Schwab will compete directly with ETFs already offered by the “big 3″ of the ETF industry – iShares, Vanguard, and State Street – including some of the largest and most liquid ETFs on the market. The four ETFs set to begin trading on Tuesday include: Schwab U.S. Broad Market ETF (SCHB): Tracks the Dow Jones U.S. Broad Stock Market Index Schwab U.S. Large Cap ETF (SCHX): Tracks the Dow Jones U.S. Large-Cap Total Stock Market Index Schwab U.S. Small Cap ETF (SCHA): Dow Jones U.S. Small-Cap Total Stock Market Index Schwab International Equity ETF (SCHF): FTSE [...]

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Chrales Schwab ETFs: Uphill Battle Ahead

Michael Johnston — Thu, 23 Jul 2009 13:21:55 +0000

Charles Schwab, one of the world’s best known and largest asset management firms, recently took another step towards finally breaking into the rapidly-expanding ETF industry. Earlier this month, Schwab filed paperwork with the SEC to launch nine ETFs. The proposed funds will have the benefit of the Schwab name (and the tremendous resources that come along with it), but will still face an uphill battle, given the firm’s late arrival to a now very crowded market. According to ETF Trends, Schwab’s first nine ETFs will include six broad-based domestic funds and three international funds. The domestic ETFs will track Dow Jones indexes, while the international ETFs will follow FTSE benchmarks: Schwab U.S. Broad Markets ETF Schwab U.S. Large Cap ETF Schwab U.S. Large Cap Value ETF Schwab U.S. Large Cap Growth ETF Schwab U.S. Mid Cap ETF Schwab U.S. Small Cap ETF Schwab U.S. International Equity ETF Schwab U.S. International [...]

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Size Does Matter (To a Point): Study of ETF Liquidity

Michael Johnston — Thu, 11 Jun 2009 07:00:36 +0000

As the ETF industry has exploded on to the scene in recent years, sponsors have aggressively launched funds in an attempt to gain market share. While many of these new ETFs have attracted sufficient investor funds to justify continued operation, some have failed to garner a level of investment necessary to support an active, liquid market and been shuttered. And then there are those that remain in business but are cited as having “insufficient liquidity.” Although there are certain rules of thumb – assets under management (AUM) of $25 million and daily volume of 25,000 are often cited as “liquidity thresholds” – there is no hard evidence to support these guidelines. In an effort to determine where illiquidity ends and an active market begins, I analyzed the impact of size and daily volume on the liquidity of various ETFs. To start, I divided ETFs into six baskets based on three-month average daily [...]

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How Beta Got Her Groove Back

Michael Johnston — Thu, 07 May 2009 05:02:48 +0000

It’s been almost 17 years since two economists at the University of Chicago, Eugene Fama and Kenneth French, published an attack on the stock price measure of risk known as “beta,” prompting “Beta is Dead” headlines from numerous financial publications. While these obituaries may have been a bit premature (beta is still widely taught in university finance courses and widely accepted in the business valuation field), the groundbreaking article caused some irreparable damage to beta’s reputation. Now, with the recent surge in popularity of ETFs, beta has been reinvented as a metric for evaluating and comparing the efficiency of funds. A Quick Refresher For those far removed from their Finance 101 days, beta is a component of the Capital Asset Pricing Model (CAPM for short), one of the most influential theories in financial economics. Beta reflects the relative volatility of a stock – how much the price of an individual security moves up [...]

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Why ETF Really Stands for “Efficient Tax Features”

Michael Johnston — Thu, 30 Apr 2009 20:24:02 +0000

When touting the benefits of ETFs relative to actively managed mutual funds and even index mutual funds, many investors (myself included) often lead with the lower cost structures and improved flexibility and transparency of ETFs. While the tax efficiency of ETFs relative to mutual funds is often mentioned as a secondary advantage, this benefit is rarely accompanied with a detailed explanation. Delaying, Not Eliminating ETFs do not possess some magical repellant to keep Uncle Sam away forever. But because of the way they are created and redeemed (we’ll get to this in a minute), ETFs allow investors to pay accumulated capital gains taxes upon the final sale of the ETF. Conversely, investors in many actively managed mutual funds incur capital gains taxes as the fund managers buy and sell stocks in an attempt (often a futile one) to generate alpha, or when fund managers are forced to sell shares to cash [...]

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ETF Database » IYY

Five Critical Questions To Ask When Investing In ETFs

Related Posts:

Five Ways To Slash Your ETF Expenses

Related Posts:

Schwab ETFs Could Be A Gamechanger

Related Posts:

Chrales Schwab ETFs: Uphill Battle Ahead

Related Posts:

Size Does Matter (To a Point): Study of ETF Liquidity

Related Posts:

How Beta Got Her Groove Back

Related Posts:

Why ETF Really Stands for “Efficient Tax Features”

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