Create Your Own ETF Hedge Fund: A Do-It-Yourself ETF Strategy for Private Wealth Management

by David Fry

Overview

Individual investors who want to break away from conventional financial plans often find it hard to make this change, even when it's clear that their current course of action is outdated, inflexible, and costly.

Author David Fry is extremely familiar with this situation. He has devoted over thirty-five years to the business of trading and portfolio management and, as founder of ETF Digest, has been at the forefront of major investment trends. Fry knows what it takes to make it as a successful investor, and now, with Create Your Own ETF Hedge Fund he'll show you how.

Many investors are intrigued by the profit potential of today's hedge funds, but most feel like they're on the outside looking in—due to the high investment requirements and complexity of these vehicles. Create Your Own ETF Hedge Fund will allow you to break down these barriers and effectively operate within this environment by:

• Demystifying hedge funds and explaining why they're so popular
• Detailing the number and type of current, new, and proposed ETFs, which can enhance your investment returns
• Outlining real portfolio construction techniques, which are easy to understand and implement
• And much more

Unlike other hedge fund resources, however, this book doesn't discuss riskier exotic strategies. Instead, it focuses on essential approaches—global macro long/short and aggressive growth—that will help you take advantage of both bullish and bearish conditions across the globe. There is no leverage required, only a desire and willingness to put a plan of action together and, if necessary, find the help you need to put it to work.

Divided into three comprehensive parts, Create Your Own ETF Hedge Fund is an excellent way to get involved in this dynamic field. If you're interested in innovative investment concepts, this book will allow you to develop flexible strategies that suit your specific goals and personality.

Structuring your own hedge fund using ETFs has never been easier, and the longer you wait to do so, the further you'll be left behind. Filled with in-depth insights and expert advice, Create Your Own ETF Hedge Fund, is the ideal guide for those looking to invest for success.

Product Details

ISBN-13:	9781118045138
Publisher:	Wiley
Publication date:	01/04/2011
Series:	Wiley Finance , #412
Sold by:	JOHN WILEY & SONS
Format:	eBook
Pages:	352
File size:	6 MB

About the Author

David H. Fry is founder of ETF Digest, a leading newsletter web site (www.etfdigest.com) for active traders and investors involved with ETFs. He founded ETF Digest in 2001 and was among the very first to see the need for a pulication that provided extensive information and advice on ETF investing. Fry has devoted over thirty years to the business of trading and portfolio management. His registration as an arbitrator with both the National Association of Securities Dealers(NASD) and the National Futures Association (NFA) attests to his extensive experience and spotless compliance record.

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Table of Contents

Acknowledgments     xv
About the Author     xvii
Introduction     1
Contemporary Investment Conditions
Hobson's Choice     7
Current Situation: The Captive Client     8
How the Investment Business Changed     9
The Age of the DIY Investor     11
If You Can't Beat 'Em, Join 'Em     13
Bad Apples and Unethical Practices     15
High Pressure Environment     17
The Regulators Crackdown     18
The Mother of All Mutual Fund Scandals     20
But Wait, There's More Potential Scandal Ahead     22
Client Rumblings and Grumblings     22
I Still Want Someone Else to Do It     23
Reports of My Death Have Been Greatly Exaggerated     24
Future Area of Growth: Unified Accounts     26
The Future for Financial Advisors Never Brighter-Maybe     28
Two Body Blows to Wall Street Fees     29
Conclusion     30
ETFs-The New Investment of Choice     33
DIY Investors Take Charge     34
What Took ETFs So Long to Catch On?     36
Indexing versus Active Management     37
ETFs and Indexing     51
The ETF Tsunami     51
New Quantitative Indexes     53
International ETFs     55
Inverse ETFs     57
Ultra, Leveraged Short, or Long ETFs     60
Commodity and Currency ETFs     61
Actively Managed ETFs     64
With Growth Come Other Problems     64
A Disruptive Technology Indeed!     65
The Rise of Hedge Funds     67
What We Really Mean by Hedge Fund     68
Hot New Sector: Private Equity     78
Growth of Hedge Funds     78
Who Invests in These Complex Strategies?     80
Why Invest in Hedge Funds Anyway?     81
But Can Retail Investors Participate?     82
Hedge Fund Disasters     87
To Regulate or Not     88
Hedge Funds Are Here to Stay     90
A Convergence Story     91
Mutual Funds, ETFs, and Hedge Funds     91
Mutual Funds Adopting Some Hedge Fund Strategies     92
Futures Investment Strategies in Hedge Funds     93
Rydex Investments Leads a Big Change     94
PowerShares Actively Traded ETF     96
PowerShares Private Equity ETF     99
Commodity ETFs Direct     102
Currency ETFs Direct      104
Inverse ETFs Direct     105
New Margin Rules     107
The Zero Commission     110
Convergence Well Underway     110
The Bullish Bias Gets a Makeover     113
Other Contributing Forces     114
Commissions Out, Fees In     115
Recurring Fees     117
The Greenspan and Bernanke Put     117
Money Supply Shenanigans     118
Excess Liquidity and Stock Buybacks     120
I'm Forever Blowing Bubbles     120
Bye-Bye Glass-Steagall     121
"Da Boyz" and Primary Dealers Merge     123
Does the Fed or Treasury Manipulate Markets?     127
Time to Connect the Dots     130
The New Robber Barons     131
Two Jokers in the Deck     132
What Bears Are Up Against     133
Strategies
Market Neutral     137
The Northwest Quadrant     140
Even Here, Risks Remain     141
ETFs and Market Neutral Strategies     141
Alpha Strategies     149
Market Neutral Mutual Funds     155
Conclusion     156
Global Macro     159
LTCM Blows Up      160
Gunslingers     162
Think Global, Invest Global     162
Trade Global     165
So You Wanna Be a Gunslinger, Too?     172
Conclusion     178
Doing It Their Way     181
Selected Trader Profiles     183
Selected Stock Pickers Profiles     183
Selected Distressed Securities Profiles     184
Selected Quantitative Profiles     184
Other Famous Hedge Fund Practitioners     185
Insider Trading Building Performance?     186
So If It's a Game for the Big Boys, How Can We Play?     190
Trading-Do I Have To?     193
One True Thing     193
Market Timing Myths and Realities     197
The Lazy or Passive Investor: No Single Strategy Always Performs Best     200
The Lazy Hedge Fund Investor: The Do-Nothing Crowd     202
Merrill and Goldman Try to Shake Things Up: Can Passive Indexes Destroy Fees?     203
Day Trading: Frenetic and Intense     205
Shorting Explained: To Go North, Head South     208
Quantitative Trading: Reserved for the Left Brain Crowd     209
Multistrategy: All Things to All People     212
Conclusion     214
Hedge Funds for the Rest of Us
Lower-Risk Global Macro Long/Short Strategies     217
The ETF Digest Methodology     217
Overwhelmed     217
Fast-Forward 35 Years     219
Trend Following     222
Risk Management     228
The Two-Thirds Objective     230
Finding Your Sacred Cows     233
ETFs Provide the Tools for Implementing Global Macro Long/Short Strategies     238
The Trick Is Putting Them Together     242
Constructing Your Own ETF Hedge Fund     243
Typical Questionnaire     244
Long-Term Investor or Short-Term Trader     246
Awash in ETF Choices     247
Performance Myths and Realities of Style     251
One World Marker     255
True Diversification     257
Shorting Essentials     264
Portfolio Reallocation     264
Actively Managed ETFs and Mutual Fund Posers     265
Conclusion     265
ETF Hedge Fund Portfolios     267
Long-Term or Short-Term Approach     268
Aggressive Growth     272
Growth     275
Growth and Income     277
Dave's Special Portfolio     279
ETF Substitutes      280
Conclusion     281
Tools and Resources     283
Where to Get the Help You Need     283
Online Tools     283
Important Tools I Like     304
Market Information Resources     305
Conclusion     308
Eight Steps to Building Your ETF Hedge Fund     309
Define Yourself     309
Develop Your Hedge Fund Strategy     309
Use ETFs as the Primary Tool     310
Using Mutual Funds as an Alternative Vehicle     310
Get Help, Even If You're a DIY     311
If You Want to Use a Financial Advisor, Find the Right One     314
DIYs Need an Online Broker     314
Find the Support Tools You Need     315
Conclusion     315
Index     317