Exchange-Traded Funds For Dummies®, 2nd Edition

Chapter 20

Ten FAQs about ETFs

In This Chapter

Assessing risk

Considering professional help

Figuring out which ETFs make sense for you

Oh, it’s been fun writing a book about exchange-traded funds! Often when someone asks me what I’m working on, and I say, “The second edition of Exchange-Traded Funds For Dummies,” I see the eyes glaze over, and then, if the topic isn’t immediately steered in a new direction, I’m inevitably asked what the heck an exchange-traded fund is. And so I explain (essentially quoting, from memory, a few lines from this book’s Introduction). The next question I’m asked is invariably one of the following.

Are ETFs Appropriate for Individual Investors?

You bet they are. Although the name exchange-traded funds sounds highly technical and maybe a little bit scary, ETFs are essentially friendly index mutual funds with a few spicy perks. They are more than appropriate for individual investors. In fact, given the low expense ratios and high tax efficiency of most ETFs, as well as the ease with which you can use them to construct a diversified portfolio, these babies can be the perfect building blocks for just about any individual investor’s portfolio.

Are ETFs Risky? ...