The Individual Investors Guide to Exchange-Traded Funds 2006文档.doc

The Individual Investors Guide to Exchange-Traded Funds 2006 By Maria Crawford Scott and Jean Henrich In the exchange-traded fund universe, 2006 is proving to be the year of the Big Bang. Over the last year, more than 100 new exchange-traded funds (ETFs) have been added to the lineup, with this year’s guide covering 293 exchange-traded funds. At the same time, total assets have grown to $337 billion from last year’s $253 billion (excluding HOLDRS), according to the Investment Company Institute, an investment company trade organization. The assets include $195 billion in broad-based U.S. stock ETFs, $38 billion in U.S. sector stock ETFs, $85 billion in global and foreign stock ETFs, and $18 billion in bond ETFs. Exchange-traded funds are generally passively managed portfolios of securities that track an index, offering an alternative to traditional index mutual funds. They are similar to traditional mutual funds in that they consist of a portfolio of securities. However, ETFs are listed on an exchange and trade just like an individual stock, offering trading flexibility that does not exist with traditional index funds. The concept is not new. The first exchange-traded fund, the SP 500-tracking SPDRs (“Spiders,” ticker symbol SPY), was introduced in 1993 and was an immediate hit. Qubes (a name derived from the original ticker QQQ, now QQQQ), which tracks the NASDAQ 100 index, was introduced in 1999 and is the most actively traded ETF today, although there are more assets in SPDRs. What’s New There is nothing mundane about this year’s new ETF offerings. From IPOs, to foreign currencies, to non-market capitalization weightings, to commodities and futures, to leveraging and shorting—it is hard to imagine an area of the market that has not been covered, sometimes several times over. And although ETFs are designed to track an index, many of this year’s new offerings track indexes most investors have never heard of. There are two reasons for this. One is that a numbe