The Seeking Alpha ETF Investing Guide

Sick of poor returns, tax bills, mutual fund scandals, biased research, bad advice from brokers and excessive fees? Seeking Alpha's ETF Investing Guide is a free, unbiased online investment guide for mainstream and wealthy individuals that shows you how to lower your risk and slash your investment costs using exchange-traded funds (ETFs).

It's arranged right here in short chapters to make it easy to read online. For a quick overview, read the one-page summary. It presents the key points from each chapter, and links to them for fuller explanation.

One-Page Summary of the Entire Guide

Introduction - Why You Should Read This

What Not To Do

• The Three Goals of Investing
• Was Peter Lynch Really Right?
• Your Stock Picks Aren't As Good As They Seem
• The Problem With Tech Stocks
• Did Stock Picking Distract You?
• How To Beat the Market
• The Challenge of Trying to Pick Small Cap Stocks
• Measuring Stock Pickers’ Underperformance
• Why You Shouldn’t Buy Mutual Funds
• Mutual Fund Ratings
• How to Run a Mutual Fund Company
• So You Thought Mutual Funds Help You Diversify?
• Summary: What Not To Do

A Better Approach

• Why Indexing Wins
• Do You Really Need Help With Asset Allocation?
• A 1-Page ETF Primer
• The 7 Advantages of ETFs Over Index Mutual Funds
• ETFs Are Cheaper Than Index Mutual Funds
• The Single (But Serious) Disadvantage of ETFs
• Summary: A Better Approach

How To Assemble an ETF Portfolio

• A Core ETF Portfolio
• Understanding the Core Portfolio
• The Low-Maintenance ETF Portfolio
• Why You Shouldn't Own DIA, SPY or QQQQ
• What to Buy in Which Account
• The 4 Criteria for Picking a Brokerage
• Summary: How to Assemble an ETF Portfolio

How to Manage Your Portfolio to Reduce Risk & Raise Returns

• Turning Taxes to Your Advantage
• How to Make Money By Rebalancing
• Rebalancing Rules
• Should You Use Sector ETFs?
• Combining Tax Loss Selling & Rebalancing
• Summary: How to Manage Your Portfolio

When To Get Started

• The Getting Started Problem
• Three Candidates for a Solution

Emerging Markets & Closed-End Funds

• Why You May Want Exposure to Emerging Markets
• Why Use Closed-End Funds?
• Buying Closed-End Funds in Practice
• Closed-End Funds to Consider
• Summary: Emerging Markets & Closed-End Funds

Brokers, Financial Advisors & Investing For the Wealthy

• My Broker's an Honest Fox
• Asset-Based Fees to the Rescue
• Me, Use an Online Broker? But I'm Rich!
• But What if You Saved $275k Annually?
• Financial Advisors
• Separately Managed Accounts (SMAs)
• The Quirks of Market Segmentation
• What to Do With What's Left?
• Summary: Brokers, FAs & Investing For the Wealthy

Putting It All Together

• A Quick Checklist
• The 9 Advantages of ETF/Online Brokerage Investing
• The ETF Resource Page

About The Guide

• Important Information
• About the Author

Comments

[hal stark]

Is this ETF guide available in book form or by e-mail?
Thank you,

[ErnestHarris]

Since there are now many more ETFs to choose from, do you plan to update the ETF Investing guide?
16-June-2007

Thanks

[DavidJackson]

Ernest,

We've just published a completely updated listing of ETFs with commentary -- the <b>ETF Selector</b>. Let me know if you have any feedback on it or suggestions.

The Guide is basically up to date, because it discusses investment strategy rather than individual ETFs. The core portfolio probably needs updating though as some lower cost alternatives are now available, such as the new bond ETFs.

Best,
David

[orangejuiceviiix]

Hi David,

Will really appreciate it if you add a section on non-resident aliens (NRA) buying ETFs (or maybe stocks in general) in the US using US online brokerage. What are the possible tax implications of a NRA constructing an ETF portfolio?

Thanks

[DavidJackson]

Hi orangejuiceviiix,

I must admit -- I know nothing about that subject, and I've tried to cushion all tax discussion in the Guide with a disclaimer of "check with your accountant". Sorry not to be more helpful.

If you find someone to write that chapter, send them my way!

David

[CharlieBrown]

When I first read the ETF Investing Guide it struck a chord in me since I had been trying to find an investment strategy for many years. I had gone through various investment firms, had wrap accounts, a personal financial investor, and lost money in the dotcom crash. After reading the ETF IG I realized that I needed some tools to help implement converting the stocks and mutual funds that I had over into ETFs. So I created a simple 2 sheet excel spreadsheet with the first sheet containing all assets and what categories each asset fell into. The second sheet took the totals from the first sheet and plugged them into the Theoretical column (see example below). The only value the user inputs in the second sheet is the Stock percentage which in this case uses 70%. One could easily add the percentage over/under invested for any asset class that could act as a trigger when to rebalance the portfolio. It takes me about 20 minutes to update this information each quarter.

Difference key: invest more 1,234 Goal Stock 0.70 324,800 Bonds 0.30 139,20
invest less (1,234) Actual 0.69 318,700 0.29 145,300
Difference 6,100 (6,100)

ETF Fund Name Category Expense Percent Theoretical Actual Difference
IVV iShares S&amp;P 500 Ind Fund Large Cap 0.09 17.50 81,200 212700 (131,500)
IJH iShares S&amp;P Mid Cap 400 Mid Cap 0.20 17.50 81,200 11000 70,200
IWM iShares Russell 2000 In Small Cap 0.20 17.50 81,200 35000 46,200
EFA Ishares MSCI EAFE Ind Foreign 0.35 4.38 20,300 60000 (39,700)
EEM Ishares MSCI Emerging Mk Emerging 0.75 4.38 20,300 0 20,300
RWR street TRACTKS Wilshire REIT 0.25 4.38 20,300 0 20,300
CASH Cash Cash 0.00 4.38 20,300 0 20,300

LQD iShares GS Investop Corp Bd Bond Crp 0.15 12.00 55,680 74000 (18,320)
SHY iShares Lehman 1-3 yr Tr Bd Bond Sh 0.15 12.00 55,680 44300 11,380
IEF iShares Lehman 7-10 yr Tr Bond Lng 0.15 6.00 27,840 27000 840
100.00 464,000 464000

--Charlie

[CharlieBrown]

Sorry about the data compression. I had everything spaced out nicely in columns but the spaces were removed when the comment was submitted.

--Charlie

[JasonZirotti]

Charlie,

Do you have a copy of that Excel doc (minus all of your personal info, obviously)? I would appreciate if you could shoot it my way!

Cheers,

zirotti at gmail dot com

[Electricjoshua]

What about Claymore ETFs?

[thetrystero]

Hi Dave,

Thanks for putting together this guide.
I realize this is targeted mostly at my core portfolio, but I wonder what your views are with regards to retirement investments. Does the same apply, i. e. favor ETFs over mutuals? It seems that for most IRA accounts available now (Vanguard etc.) ETF seems (to me at least) to be a rather unconventional route. Is there a reason that retirement funds are focusing more on mutuals?

[DavidJackson]

Thetrystero,

Thanks for your kind comment.

ETFs for retirement accounts are a fascinating issue. Most plan administrators don't offer ETFs, so you don't even have the option to use them. One reason might be that if you're adding small amounts regularly to your retirement account, the trading fees would take too large a bite out of your capital. On the other hand, since ETF fees are so low, they're well suited for long term investing like retirement accounts. For that reason, some companies are trying to pool ETF trades among multiple accounts to reduce or eliminate the trading fees.

Not sure if that answers your question though...

David

[User 158820]

Hello Everyone
I'm looking for a tool that I can pretty closely match a mutual fund's performace to a ETF in the same catagory and style. For example, I looking for an ETF that closely matches the mutual fund ECIGX.
Thanks For The Help
Dennis

[User 158820]

Hello Everyone
I'm looking for a tool that I can pretty closely match a mutual fund's performace to a ETF in the same catagory and style. For example, I looking for an ETF that closely matches the mutual fund ECIGX.
Thanks For The Help
Dennis

[SMallick]

Hello everyone - the MacroShares Oil Up (UCR) and Oil Down (DCR) ETF's recently hit their early termination triggers and will be redeemed in June. Are you aware of any search tool that lists such triggers for other ETFs? Other than that it seems like the only option is to read the prospectus of every single ETF before trading.

[autboy]

Wish I had taken this years ago. Alas...

[valenna]

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[User 25255]

Thanks! This guide is helpful and a great tool for those of us that need some direction on a passive strategy!

Now if I could just read something that would teach me discipline.... I would be all set..

[User 220206]

I'm looking for an inverse index Financials Sector FET. Any thoughts welcome.

[PCScipio]

SKF is a double inverse Financials, but you may be rather late to the party.

[murf-o]

How about market-neutral fund ? Check TFSMX

[Albanianhotels]

We manage 400 hotels around Albania and we would like to corporate with eny company.

[User 25255]

David, I have one question. ( Maybe I missed it in the reading. )

What about adding new contributions into the portfolio? If you add new funds in during rebalancing, then your percentages are thrown off and your triggers are no longer valid. Any recommendations on how to handle this? (other than buying a small amount of every ETF owned.)

Thanks!