Exchange-Traded Funds For Dummies, 3rd Edition

Chapter 18

Going Active with ETFs

IN THIS CHAPTER

Appreciating the difference between passive and active investing

Weighing the pros and the cons of actively managed ETFs

Reckoning how active investing might play into your life

Choosing from a smorgasbord of fund options

The first ETF in the U.S. was launched in 1993. It was the S&P 500 fund SPY. It was an index fund. And for the next 15 years, all ETFs were index funds. But then, in 2008, years of wheedling the SEC paid off, and Wall Street was finally allowed to issue its first actively managed ETF.

It was foreshadowing, and ironic, that the very first actively managed ETF was issued by Bear Stearns. Within several months, the financial collapse of the investment banking industry, led by Bear Stearns, was well on its way to creating the worst bear market (more irony) of our lifetimes. That first ETF died, folding (with money returned to investors) in October 2008, as Bear Stearns, after 85 years in business, collapsed and itself folded.

Since that time, I’ve seen the opening (and the closing) of dozens upon dozens of actively ...