The New Indexing
Index investing is now an umbrella term for strategies with elements common to active management.

ETFs Are Only As Good As the Underlying Market — And If Your Timing Is Bad, You’ll Pay
ETFs aren’t breaking down. But they are providing a reminder that these funds sometimes deliver worse results than the underlying markets. It tends to happen when an investor chooses a moment of market panic to sell an ETF that’s built atop relatively illiquid assets.

Going Active
Actively managed ETFs are the biggest story that never happened. That’s about to change.

The Money Flowing Into ETFs is Broadening Out
The top-heavy ETF industry is convincing more investors to branch out. Investors have been moving more money into niche strategies, many of which are a far cry from a conventional U.S. stock fund.

Don’t Stop Believin’
One of the underlying stories about ETF growth is empowerment — empowering investors to control costs and control execution. In any traditional, actively managed mutual fund, investors are never quite sure what they are getting. Part of the ETF proposition is that you know what you’re getting.

A Little-Noticed Kink in Smart-Beta ETFs Might Blindside Buyers
While the algorithms that do the stock picking in smart beta ETF can prevent a style drift, a related hazard exists. It’s when funds tuned to one strategy start to be influenced by another: a low-volatility portfolio that gets infused with momentum stocks, for example.

Why the ETF Acronym Can Be Misleading
As investors, the media, and regulators put more focus on exchange-traded funds, it’s worth asking what exactly an ETF is.

Weighing the Thrills and Spills of Small ETFs
Some things just seem more dangerous — and perhaps more thrilling — when they’re small. Like cars. And planes. And, for some investors, exchange-traded funds.

Two Really Cheap ETFs Face Off. Investors Win.
The ETF industry has been innovative in expanding where and how funds invest. The competition in cost is another frontier altogether. Vanguard started the low-cost trailblazing with its index mutual funds and then with its ETFs, but Schwab has taken it to another (lower) level.

Jack Lew: In ETFs He Trusts?
Unlike the vast majority of baby boomers, who don’t use ETFs at all, Jack Lew, the current Treasury Secretary, is saving himself thousands of dollars per year in fees and beating a solid two-thirds of active mutual fund managers.

Hedge Fund ETF Weapons Turn Dangerous for Solo Investors
As the biggest ETF managers capture assets from traditional mutual funds with benchmark-tracking offerings, smaller competitors are catering to sophisticated investors with an increasingly complex arsenal of products.

Leaving The Index Behind
Active exchange-traded funds are seeing a flurry of interest again. But questions remain over whether the products will ever be more than a niche within the bigger $2 trillion industry.

Battle lines shifting in ETF fee war
Fee wars have been a part of the exchange traded fund landscape for years. But sources say investors are also looking at other costs such as spreads and commissions. The ETF industry, meanwhile, is busy building relationships with distributors and packagers of ETFs to extend the reach of their lower-cost products.

ETFs close in record numbers despite industry boom
Record numbers of exchange traded funds have closed so far this year, underscoring the difficulty many of the investment vehicles face in gaining traction among investors, despite the industry’s overall boom in popularity in recent years.

US investors increase reliance on ETFs
Investors in the US are increasing their use of exchange traded funds as the role of ETFs within investment portfolios continues to expand and broaden.

Green light given to ETF ‘self-indexing’
US regulators have given the green light to providers of exchange traded funds to use back-tested data when marketing new products to institutional investors.

Vanguard raises the possibility of free ETFs
Exchange traded fund providers have room to reduce charges to zero and could even pay clients to invest in their products, according to US firm Vanguard.

ETF Does Not Mean Index Fund
Today, the ETF acronym is being used broadly by the fund industry and media outlets to include non-fund product structures and active management strategies. This usage has created confusion in the marketplace.

Do ETPs Give Shorts a Free Ride?
If you are long an ETP, you are paying the manager. But those who are short are actually riding the management fee. In addition, the creation/redemption of ETP shares means that a short has the potential for an economic gain (or loss) based on assets that aren’t actually in the fund.

Day Trading Gabelli
Precidian has devised a new structure that would essentially enable old-school mutual fund companies to offer ETF versions of their existing actively managed funds.

Coming Soon: Index ETFs That Follow Secret Indexes
ETF firms are no longer required to have separation between fund management and index provider. In addition, the SEC Orders state that self-indexing methodology does not have to be rules-based and that the holdings in a self-index do not have to be made public. The methodology doesn’t even have to be disclosed, nor do changes to the methodology.

Wave of new strategic beta ETFs make passive investing more complicated
One can’t dismiss the suspicion that multi-factor funds are a result of the rush among ETF providers to distinguish themselves from the rest of the herd.

Active ETFs produce few stars and even fewer fans
It is an incarnation that is less than a decade old that includes some glowing success stories, a general reluctance from most mutual fund managers to get on board, and an arm’s-length circumspection from the financial advice community.

Are ETFs really cheaper than mutual funds?
A new report by Morningstar Inc. casts new doubt on the relative cost advantages of ETFs over comparable mutual funds.

Covestor undercuts the fund giants
By introducing a new group of exchange-traded-fund portfolios with no management fees, online investment company Covestor Ltd. has joined the retail ETF price war now being waged among financial giants iShares, Vanguard and Schwab.

How ‘smart beta’ ETFs turned closet indexing into a winner
Actively managed equity mutual funds that don’t make big bets versus their benchmarks have been shunned by investors, but a handful of funds that rely on factors, or “smart beta,” have proved that you don’t need to make big bets to outperform.

One year on, iShares’ Core series clawing back market share for BlackRock
Price cuts, rebranding helps the firm recover from a case of “Vanguarditis.”

iShares takes next step to woo retail investors, fend off Vanguard
BlackRock Inc.’s exchange-traded-fund arm iShares is extending its popular core series to include managed-ETF portfolios as it continues to ramp up efforts to court mom-and-pop investors and stave off a charging Vanguard.

ETF companies are gunning for DFA
Exchange-traded-fund companies are following in the footsteps of financial adviser favorite Dimensional Fund Advisors Ltd. and building new products around academic research to offer investors a new way to beat the market.

Fidelity poised to be an ETF juggernaut
Fidelity Investments has only dipped its toe into exchange-traded funds so far, but the groundwork has been laid for a splash that could shake up the ETF industry.

Advisers don’t have a firm grasp of ETF liquidity, Cerulli finds
The ability to get in and out of markets quickly has always been one of the most attractive features of exchange-traded funds, but it turns out it may be the feature advisers understand the least.

Active ETFs will make it easier to beat an index
Closet indexers could get a boost because of the funds’ lower fees.

Focus on fees in 401(k)s
Labor Department disclosures encourage more consideration of ‘cheap’ ETFs in plans.

Why dozens of ETFs died in 2013’s healthy market
Lack of money and momentum doom many, but some newcomers hit big.

2 ETFs that beat the S&P 500 at its own game
Avoid traditional cap-weighted indexing for a superior return.

How to have your stocks and income too
Multi-asset income ETFs spread risk, but choose carefully.

New ETFs muzzle an untamed market
Low-volatility funds chip away at investors’ wall of worry.

Investors win Schwab, Fidelity ETF war
The mutual fund business will never be the same.

Economic Signals from the Exchange – August 2012
In this issue, we take a look at the history, evolution, and growing popularity of exchange traded products (ETPs) and how they fit into investors’ portfolios.

Roaring ahead
Exchange-traded funds have overtaken hedge funds as an investment vehicle.

Emerging Trouble in the Future?
Exchange-traded funds (ETFs)—pooled portfolios of assets that trade on stockmarkets, usually linked to an index—have grown from a total value of $416 billion in 2005 to $2.5 trillion today. Their rapid growth has left regulators worrying about what might happen if the money that has flowed into ETFs decides to flow out again.

The rise of smart beta
“Smart beta” is an approach that tries to enhance the return from tracking an asset class by deviating from the traditional “cap-weighted” approach, in which investors simply buy shares or bonds in proportion to their market value.

Going broke in stocks
Investors are shifting their money from active fund managers, many of whom trade shares furiously in the hope of beating the market, to passive investments such as simple index trackers. The most disruptive of these may be the humble exchange-traded fund (ETF). McKinsey reckons that the value of assets in exchange-traded products (defined somewhat more widely than ETFs), which in 2010 was about $1.5 trillion, will more than triple by 2015.

Twenty years young
The ETF is one of the more successful financial innovations in recent decades. Its success has been driven by two things: cheapness and convenience. If you can dream up an investment style, the industry will create an ETF to match.

Exchange-Traded Funds for the Active-Minded
Actively traded E.T.F.s have yet to burn up the track with mainstream investors, who mostly cling to passive funds that mirror indexes that are benchmarks for stocks, bonds and other investments.

In Exchange-Traded Funds, a Variable Worth Watching
Buying an index fund does not guarantee the same return as the index. While variations tend to be small, the difference between a fund’s return and the index’s return, often called tracking error, can sometimes be significant.

How’s Your ETF Portfolio Doing? Good Luck Finding Out
Because the firms involved in the burgeoning business of selling prepackaged investment portfolios face few rules when it comes to reporting performance data to potential clients, side-by-side comparisons of such portfolios can be difficult, if not impossible, for consumers.

The Reasons an ETF Succeeds or Fails
The differences between the winners and the also-rans can sometimes be subtle—making the whole process of launching ETFs seem like playing the lottery.

Everything You Need to Know About a New Kind of ETF
Actively managed ETFs, available in increasing numbers from a range of investment companies, combine the most desirable features of actively managed mutual funds and index funds.

ETF Terminology, in English
When it comes to exchange-traded funds, the most difficult part for investors may not be deciding which strategy to pursue. It may be understanding the language that describes those strategies.

The $5 Trillion Question: How Did the Firm That Pioneered ETFs Lose Its Lead?
State Street launched the first ETF 25 years ago and dominated the market for a decade. Today, its slice of U.S. ETF assets is just 17.3%—down from 49% 15 years ago.

Investors Win From ETF Price War
A price war is intensifying in the $3.5 trillion exchange-traded fund industry, forcing some of the biggest firms to slash fees in a bare-knuckled bid to win a larger slice of the fast-growing market.

Four Reasons You Might Want to Avoid the Lowest-Cost ETFs
Experts say things like bid-ask spreads, liquidity, composition, and the financial health of the issuer also need to be considered.

An Algorithm, an ETF and an Academic Study Walk Into a Bar
It turns out that most of the supposed market anomalies academics have identified don’t exist, or are too small to matter.

ETFs Show Limits in World of Emerging-Market Bonds
Debt issued by governments and companies in emerging economies can be harder to buy and sell, while higher transaction costs have resulted in tracking errors.

What to Do When Your ETF Shuts Down
While ETFs have enjoyed explosive growth over the past decade, a record number of them—127—closed up shop last year, and liquidations are showing no sign of slowing.

‘Passive’ Investing Can Be a Lot More Active Than You Think
There is no doubting the rapid rise of passive investment products. The twist is a lot of them get their heaviest use from some pretty active traders.

The Hidden Weaknesses of Index Funds
Despite the S&P 500’s dominance, others continue to try to build a better market measure. And there are definitely flaws in the S&P 500 that make the pursuit worthy.

Fidelity, Vanguard Place Active-Fund Bets
Actively managed exchange-traded funds were heralded as the birth of a new era in investments when they were launched in 2008. Eight years later, they’re still the next big thing. Active ETFs have had only limited success in attracting investors.

Active Equity ETFs Make Their Case
The market for active equity exchange-traded funds has grown steadily over the past few years. But this niche is hardly flourishing, in part because of the broad movement in that same stretch away from active fund managers and into passive funds.

Fees on Mutual Funds and ETFs Tumble Toward Zero
The cost of investing is tumbling toward zero for some basic portfolios of stocks and bonds as firms duel for customers. The slide has been under way for years but is accelerating as the industry’s biggest companies target increasingly cost-obsessed investors.

Should You Fear the ETF?
Exchange-traded funds have suddenly become scary—at least to some in the investment community.

A New Low-Cost Leader Among Stock ETFs
A BlackRock Inc. exchange-traded fund can now claim the title of the lowest-cost stock ETF—but it probably won’t have that distinction to itself for long.

In Search of Low-Volatility Investments
For stock-market investors who want to sleep better at night, the fund industry has a solution: low-volatility funds and ETFs. The idea behind these investments is an equity strategy that aims to capture reasonable returns with less risk.

Currency-Hedged ETFs Soften Blow of Dollar’s Rise
Investors are pouring billions of dollars into a fashionable corner of one of the fastest-growing areas on Wall Street: exchange-traded funds that aim to protect investors against the return-crimping impact of a rising dollar.

Second Wave of ‘Smart Beta’ ETFs Is Coming
Just when you thought you finally had “smart beta” exchange-traded funds figured out, along comes Smart Beta 2.0.

Why Vanguard Is Secretive on Stock ETFs
Unlike other major ETF providers, Vanguard doesn’t divulge the daily holdings of its stock ETFs. Instead, Vanguard reports month-end portfolio data with a 15-day lag.

An ETF Time Bomb That Isn’t?
Recent research suggests that leveraged ETFs’ contribution to market volatility may be exaggerated.

Size 3x: How Leveraged ETFs Work
For stock funds, their apparent alchemy is achieved by holding the underlying stocks directly or a corresponding nonleveraged ETF, along with cash to finance a swap contract with financial counterparties, usually investment banks.

A Simple Strategy for Investing in ETFs
Concentrating on so-called plain-vanilla funds that track broad market indexes can do a lot to clear the noise of the ETF market—and marketing—some investment advisers say.

ETFs Climb Toward $2 Trillion Mark
Backed by a relentless stream of new money and supported by a five-year rally in stocks—broken only by occasional volatility—assets in U.S.-listed exchange-traded products are rapidly approaching the $2 trillion milestone and likely will pass it by early next year.

ETFs Are Required to Be Transparent? Not Always
Passively managed ETFs—those that seek to track an index—actually aren’t required to disclose all of their portfolio holdings daily.

When Does an ETF Not Look Like an ETF?
Exchange-traded funds started out as a low-cost, transparent way for investors to earn the markets’ returns. Yet these days, the hottest ETF investment strategies involve layers of fees and managers who, using complicated formulas, design model portfolios with ETFs that aim to outperform the market.

Index ETFs May Not Track Benchmarks as Expected
The party line on index exchange-traded funds is that they offer easy exposure to a benchmark, less the fund’s expense ratio. The reality is messier. The fund’s costs to buy and sell securities, and other aspects of portfolio management, influence your return as well.

Do Investors Need an ‘ETF Strategist’?
A class of uber-advisers dubbed “ETF strategists” has arrived on the investing scene, seeking to help individuals make smart choices among the nearly 1,600 easy-to-use and generally low-cost ETFs listed in the U.S. Providers include units of big brokerage firms and specialized wealth-management firms that direct billions of dollars.

Active Stock ETFs Are Poised to Take Off
While the majority of exchange-traded funds to date have been products that track indexes, active equity ETFs represent a vast opportunity in the eyes of traditional mutual-fund managers, as well as some of the largest issuers of exchange-traded products.

Do ETFs Turn Investors Into Market Timers?
There is a downside to how cheap and easy exchange-traded funds make it to buy or sell broad baskets of stocks: the danger of becoming a short-term market timer, a losing proposition for most individual investors.

ETFs Gain Ground on Index Mutual Funds
By the end of 2013, ETFs comprised almost 12% of the $13.9 trillion U.S. mutual fund and ETF market. Index mutual funds at 12.2% of the overall market wound up “virtually even” with ETFs for the first time.

Five Pointers on Floating-Rate Funds
Although floating-rate funds do offer some protection from rising interest rates, they don’t necessarily offer the benefits people are looking for, and they can come with other risks that investors don’t understand.

Key Trends in a Milestone Year for ETFs
The year began with the 20th anniversary of SPDR S&P 500, the first and still the largest ETF in the U.S., and throughout 2013 investors kept up their voracious appetite for exchange-traded funds.

Index Funds That Just Might Beat the Market
Money is piling into “smart beta” exchange-traded funds that promise to beat the market. At their core, many of these funds—also known as “fundamental index” or “factor” funds—try to take advantage of the market’s tendency to misprice stocks in times of greed or fear, a trait that is supported by decades of research.

New MLP Funds Aim to Ease Tax Burden
The tax burden of owning a fund investing in pipeline operators and related service providers can be onerous. As a result, fund sponsors have been developing new ways to play MLPs with a so-called “second-generation” of ETFs that carry less of a tax drag.

Bond ETFs That Use Fundamental Indexing Are Off to Slow Start
“Fundamental” indexing, which has gained traction with stock investors, is off to a slower start in the world of bond funds.

An Extra Data Point on ETFs*
Investors can use the indicative net asset value (INAV) ticker to learn the approximate per-share value of a fund’s holdings, as calculated at 15-second intervals throughout the trading day.

Spreading Risk with ‘Factor-Based’ Funds
Tracing their roots back to academic research from the 1960s, “factor-based” funds seek to identify a broader set of drivers behind excess returns by stocks over different market cycles.

Is There a Better Way to Build Indexes
New research from Cass Business School in London suggests that the returns of traditional, market-capitalization-weighted indexes trail those of so-called alternative indexes by as much as two percentage points a year over time.

Advisers, Gens X-Y Find Common Ground with ETFs
While most older investors stick to traditional mutual funds, exchange-traded funds are appealing to the generation that has grown up with them.

Short Looks Beautiful to Bond Investors
Some ETF buyers are shifting into funds that may suffer less if rates keep climbing.

The Hunt for the Never-Been-Done ETF
The market for ETFs has gotten so saturated fund companies are struggling to come up with niches that aren’t served by existing ETFs. However, the companies hope investors will flock to “actively managed” ETFs that rely on the expertise and research of stock and bond pickers to make money. ETF business will also see more innovation in bond funds and “alternative” stock-index approaches like minimum volatility.

Investors Climbing Aboard ETF Bond Ladders
The latest exodus by bond-wary investors is proving to be less of a drag on exchange-traded funds with a limited shelf life.

Vanguard Goes Global in Bond Funds
The giant Vanguard Group’s entrance into a growing market for international bond funds should spur more investors into overseas debt, a development that some advisers warn could prove to be a double-edged sword.

The Experts: The Biggest Changes Ahead in the ETF Market
What are the biggest changes likely to hit the ETF market in the next five years? The WSJ put this question to The Experts, an exclusive group of industry, academic and other thought leaders.

ETFs for Investors Who Buy and Hold
The basics are the best picks for long-term investors.

‘Survivorship Bias’ Is Among Pitfalls When ETFs Shut Down
For investors, closing of ETFs can cause troubles that range from potential tax bills and the disappearance of useful “niche” funds to the prospect of “survivorship bias,” which makes it harder to judge fund firms’ performance records.

Companies Add to Lineups of ‘Free’ ETFs
Still, trading commissions are only one cost, so other funds may be more attractive on balance.

Taking an Alternative Approach to Index Funds
Investing’s “new normal” is spurring more portfolio managers to say they’re willing to try alternative ways to tap into low-cost index funds.

Fidelity Set to Expand Menu of Rival’s ETFs
Under the new agreement with BlackRock, Fidelity will boost its offering of commission-free iShares-branded ETFs to 65 from 30. The new menu includes both stock and bond ETFs.

ETNs Take Off. But…
…the popularity of these notes still pales in comparison to exchange-traded funds.

The Problem With All Things Being Equal
Equal-weight indexing may be getting more attention from investors than the strategy deserves.

Advisers Reap Rewards as First ETF Turns 20
Despite skeptical clients and limited choices in the early going, portfolio managers who have been on the leading edge of bringing exchange-traded funds into the forefront of investing say they feel a sense of vindication.

Calculating the Costs of an ETF
Expense ratios are only part of the story. To understand what you’re paying, you need to do the math.

So Many Really Thin Slices, So Hard to Pick the Right One
As new exchange-traded funds continue to cut various portions of the equity universe into thinner and thinner slices, investors using the vehicles to target a particular part of the market may find themselves overwhelmed with options.

What ETFs’ Next Act Will Look Like
Exchange-traded funds have come a long way in 20 years. Here’s what to expect in the next five.

Target-Date Bond Investing Resonates With ETF Investors
Investors drawn to the security of bonds and the diversification of funds have been pouring cash into a relatively new structure in the world of fixed-income: defined-maturity ETFs.

Lots of ETFs, but So Many Are Tiny
Investing in the smallest funds carries risks not associated with the giants. To wit: Will my ETF shut down?

Watch an Index Fund’s ‘Tracking Error’
This measure captures how much a portfolio veers from its benchmark. Here’s how to use the information.

Three Quirks of Bond Indexing
Investors familiar with equities, beware: This can be trickier.

ETFs Are Duking It Out Over Fees
Two similar funds, two very different prices: Does it make sense to switch? Sometimes, but not always.

It’s Time to Limit Access
Big swings in leveraged funds make them a poor choice for many investors.

In New Funds, Old Flaws
Don’t confuse ETFs with a newer mutation called “exchange-traded notes,” or ETNs.

Are ETFs and 401(k) Plans a Bad Fit?
Not necessarily, as some companies try adding exchange-traded funds to retirement plans.

Most ETFs Are Tax-Smart. But Others…
Here’s how exchange-traded funds can help investors hold off Uncle Sam—or can trip them up

When Cheap Funds Cost Too Much
Exchange-traded funds have quickly become one of the cheapest and simplest investing tools in the world. They also are the raw material for an increasingly popular but potentially expensive and confusing way to invest.

Going Passive, Aggressively
Taking a page from individual investors, many financial advisers are giving up on actively managed funds in their quest to beat the market.

Here’s What’s Really Driving Your Returns
A concept known as “factor investing,” which originated in academia two decades ago and now is finding favor among institutional investors and high-end financial advisers.