Exchange-Traded Funds

Re: Good ETFs

Beaverly — Thu, 09 Jul 2009 02:56:04 GMT

yizhang02:

Is it a good idea to put lots of eggs, if not all, into Vanguard's basket? Thanks!

Well, first off, you're not really investing in Vanguard (or any other etf provider for that matter), you're investing in the underlying securities. Even if Vanguard were to run into trouble, the underlying securities (which are broadly diversified) would not be affected (I don't think this is true for ETNs). A couple of things could still happen though. (1) Vaguard could decide to get out of the ETF business and sell its ETF business to someone else. Barclays just sold ishares. People with ishares ETFs noticed no significant difference. However, a new provider could decide to raise expense ratios which would negatively affect your future returns. For that matter, Vanguard could decide at some point that it needs to raise expense ratios. (2) Vanguard could decide to liquidate some/all of its ETFs in which case you would either have to sell them before liquidation, or wait to receive cash for the value of the underlying securities. This would trigger capital gains tax in taxable accounts. However, liquidation is much more likely for small, niche ETFs with little following from small-time providers who aren't willing to keep them afloat in order to maintain brand credibility.

Secondly, most ETFs (and all Vanguard ETFs) are passively managed, so you are not relying on one management team to make strategic stock-picking and market-timing decisions. You are invested in broad markets and/or sectors.

Therefore, I don't see any major systemic risk implications to having all of your eggs in Vanguard ETFs or in well capitalized ETFs from any other major provider.

Re: Good ETFs

yizhang02 — Mon, 08 Jun 2009 22:00:10 GMT

Is it a good idea to put lots of eggs, if not all, into Vanguard's basket? Thanks!

Re: Good ETFs

daniele74 — Tue, 02 Jun 2009 05:41:40 GMT

Good info, folks!

Thank you

Re: Good ETFs

Beaverly — Tue, 02 Jun 2009 05:35:00 GMT

The first question you should ask is, "Does Vangaurd have an etf that covers what I want?". If they do, it's probably your best bet.

Re: Good ETFs

Beaverly — Tue, 02 Jun 2009 05:23:15 GMT

Another thing to look at is how diversified the etf really is. Some etfs are concentrated in just a few holdings (this maybe the only option for very narrow niche etfs). Other etfs are well spread out across hundreds or thousands of holdings.

Re: Good ETFs

hetfund — Tue, 02 Jun 2009 01:12:02 GMT

ER is one way to measure the "cheapness" of an ETF. The finance rate, or implied financing is another measure to evaluate the cheapness of an ETF. More information can be found on www.hetfund.com.

Re: Good ETFs

daniele74 — Fri, 15 May 2009 03:45:49 GMT

Hi Super,

Yes indeed, I was hoping to burst a lively conversation, but your reply made my initial post worth already.

Very good points. Thank you for sharing.

Re: Good ETFs

Super_Snark — Thu, 14 May 2009 22:43:56 GMT

If you were looking for lively conversation, you might be out of luck. The good ones are the cheap ones, plain and simple. Note that different ETFs can track the same index, or they might track very similar ETFs. You can sort by category on the ETF screener, and select the lowest ER (unless that amount rules out all ETFs in that category). The cheapest usually wins in terms of performance. ETFs with the most expensive ERs tend to track to contrived or dubious indexes, or have a gimmicky strategym and these are also more likely to be liquidated in the future.

Note that after the explosion of ETFs on the market, we are looking at a slew of ETFs that are being liquidated due to lack of interest. You don't want to be holding any of these. So, look for ETFs that have significant market capitalization and trading volume. These typically don't suffer the market price tracking error that bedevils the less widely traded ETFs. These are usually the cheapest in terms of expenses. That is another reason why expenses matter with ETFs.

Now get with it!

Good ETFs

daniele74 — Wed, 13 May 2009 22:32:18 GMT

Hi, I am new to ETFs, bought and sold stockes and funds before and few ETFs, but I would like to see if the folks here could give the ETFs (not CEF) you like most that tracks the indexes below:

Energy in General

Just Solar

Small caps

Malaysia

Canada

Global Real State

Industrial Materials

Consumer Goods

Healthcare

Telecommunication

Thanks for the help