Exchange-Traded Funds For Dummies®, 2nd Edition

Introduction

Every month, it seems, Wall Street comes up with some newfangled investment idea. The array of financial products (replete with 164-page prospectuses) is now so dizzying that the old lumpy mattress is starting to look like a more comfortable place to stash the cash. But there is one relatively new product out there definitely worth looking at. It’s something of a cross between an index mutual fund and a stock, and it’s called an exchange-traded fund, or ETF.

Just as computers and fax machines were used by big institutions before they caught on with individual consumers, so it was with ETFs. They were first embraced by institutional traders — investment banks, hedge funds, and insurance firms — because, among other things, they allow for the quick juggling of massive holdings. Big traders like that sort of thing. Personally, playing hot potato with my money is not my idea of fun. But all the same, over the past several years, I’ve invested most of my own savings in ETFs, and I’ve suggested to many of my clients that they do the same.

I’m not alone in my appreciation of ETFs. They have grown exponentially in the past few years, and they will surely continue to grow and gain influence. While I can’t claim that my purchases and my recommendations of ETFs account for much of the growing $1 trillion+ ETF market, I’m happy to be a (very) small part of it. After you’ve read this second edition of Exchange-Traded Funds For Dummies, you may decide to become part of it as well, ...