Trust me, there’s a lot about ETFs that you don’t know. David Stevenson, a columnist at the Financial Times, and David Tuckwell, editor of ETF Stream, set out to remedy that situation. The Ultimate ETF Guidebook (Harriman House, 2019), even though in some of its chapters it tilts toward the European and London markets, should be of value to everyone using, or thinking about using, ETFs in their portfolios.
For those who want a look under the hood, the book explains the different ways in which ETFs can be constructed (physically replicating, synthetically replicating, ETN or ETC), reasons for tracking errors, and how ETF issuers can make money even if their fees are close to zero (lending stock to short sellers).
The book takes aim at the argument that passive investing is taking over and that passive funds will destroy efficient markets. It analyzes the continuum of ETF investing strategies, maintaining that passive and active is not a binary choice. It introduces the reader to factor-based investing, ESG investing, and leveraged ETFs.
Following a detailed laundry list of global asset classes, the book turns to building ETF portfolios as constituents of diversified portfolios. The authors suggest that the ordinary (in reality, the more sophisticated) investor might think about copying some of the strategies of macro hedge funds using ETFs.
The authors then devote a chapter to five model portfolios: adventurous growth, balanced, opportunistic, contrarian, and cautious. And finally, they list what they consider to be the top 75 ETFs in the London market and 26 wild card ETFs.
All in all, The Ultimate ETF Guidebook would be a worthy addition to any investor’s library.