• Features
  • Exchange-Traded Funds
  • The Individual Investor’s Guide to Exchange-Traded Funds 2013

     

    The exchange-traded fund (ETF) industry marked its 20th anniversary this year.

    The SPDR S&P 500 ETF (SPY) was incepted on January 22, 1993, after being conceived and championed by the late Nathan Most. According to Institutional Investor Magazine, Most came up with the idea while seeking new revenue opportunities for the American Stock Exchange (Amex). Using commodities as a basis, he thought of a product where a depository would hold blocks of securities and issue receipts for them, which in turn could be divided into many small pieces tradable on the exchange. (SPDR is an acronym for Standard & Poor’s depositary receipts.)

    The genius of Most’s creation was that it allowed institutional investors a mechanism for hedging their portfolios, while offering individual investors an easy way of buying and selling shares in an index. This was an important point because, as Institutional Investor Magazine notes, the 1987 crash made the Securities and Exchange Commission (SEC) more receptive to proposals for what were then new hedging products. Nonetheless, it took Most six years to get approval from the Amex and then the SEC before the SPDR S&P 500 fund was launched.

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    Discussion

    Arnold Chong from IA posted over 3 years ago:

    Written well for average investor to understand world of ETF.


    Don Anderson from CA posted over 3 years ago:

    Incepted???? (In very first paragraph of article.) Presume the author means introduced, not ingested. Where are the editors when you need them!


    Greg Mckelvey from GA posted over 3 years ago:

    The (downloadable) expanded ETF listing provides very useful information for researching and selecting ETFs for investment. In addition to being sortable and searchable, the categorization is also helpful. However, the information is a wasting asset, which for me, would not be a reliable resource very long, certainly no longer than a calendar quarter. I would urge you to offer regular updates at least quarterly, and even more frequently if resources permit.

    It is information that any AAII member that uses ETFs in their investment portfolio can benefit from, and it becomes more valuable when the information remains more current.

    Thanks!


    Anthony DeMaria from GA posted over 3 years ago:

    Good article but - - - -

    How can ETFreplay.com (which provides very good info to a free subscriber) be used in evaluating ETF's.

    AAII officials as well as members please provide assessments and what we should use/do.

    Thanks AA DeMaria cumming GA


    Charles Rotblut from IL posted over 3 years ago:

    Hi Anthony,

    I'm not familiar with the website you mentioned, but I looked briefly at it. There are various websites touting strategies and showing results designed to make their performance look good. This does not mean the strategies work in a real world environment or will work in the future.

    I can't speak to how ETFreplay's strategies will or will not work. I can tell you that any strategy that requires more trading will result in higher tax and transaction costs. It will also require more attention on your part.

    -Charles


    Alfred Hess from NC posted over 2 years ago:

    Any chance that AAII will give the same type of detail to the performance of ETFs as it does to MFs? Such as the 50 top performing ETFs of 2013, etc. with details of the past 4 years as well at the average performance for the past 3, 5 and 10 year? Thanks



    Charles Rotblut from IL posted over 2 years ago:

    Alfred,

    The expanded listings spreadsheet contains up to 10 years of data, but most ETFs are far younger than that. Many foreign and sector funds weren't even five years old at the time we put together last year's guide.

    -Charles


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