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 allows you to break down these barriers and effectively operate within this environment. 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 allows you to break down these barriers and effectively operate within this environment. Acknowledgments xv About the Author xvii Introduction 1(6) PART ONE Contemporary Investment Conditions Hobson's Choice 7(26) Current Situation: The Captive Client 8(1) How the Investment Business Changed 9(2) The Age of the DIY Investor 11(2) If You Can't Beat 'Em, Join 'Em 13(2) Bad Apples and Unethical Practices 15(2) High Pressure Environment 17(1) The Regulators Crackdown 18(2) The Mother of All Mutual Fund Scandals 20(2) But Wait, There's More Potential Scandal Ahead 22(1) Client Rumblings and Grumblings 22(1) I Still Want Someone Else to Do It 23(1) Reports of My Death Have Been Greatly Exaggerated 24(2) Future Area of Growth: Unified Accounts 26(2) The Future for Financial Advisors Never Brighter---Maybe 28(1) Two Body Blows to Wall Street Fees 29(1) Conclusion 30(3) ETFs---The New Investment of Choice 33(34) DIY Investors Take Charge 34(2) What Took ETFs So Long to Catch On? 36(1) Indexing versus Active Management 37(14) ETFs and Indexing 51(1) The ETF Tsunami 51(2) New Quantitative Indexes 53(2) International ETFs 55(2) Inverse ETFs 57(3) Ultra, Leveraged Short, or Long ETFs 60(1) Commodity and Currency ETFs 61(3) Actively Managed ETFs 64(1) With Growth Come Other Problems 64(1) A Disruptive Technology Indeed! 65(2) The Rise of Hedge Finds 67(24) What We Really Mean by Hedge Fund 68(10) Hot New Sector: Private Equity 78(1) Growth of Hedge Funds 78(2) Who Invests in These Complex Strategies? 80(1) Why Invest in Hedge Funds Anyway? 81(1) But Can Retail Investors Participate? 82(5) Hedge Fund Disasters 87(1) To Regulate or Not 88(2) Hedge Funds Are Here to Stay 90(1) A Convergence Story 91(22) Mutual Funds, ETFs, and Hedge Funds 91(1) Mutual Funds Adopting Some Hedge Fund Strategies 92(1) Futures Investment Strategies in Hedge Funds 93(1) Rydex Investments Leads a Big Change 94(2) PowerShares Actively Traded ETF 96(3) PowerShares Private Equity ETF 99(3) Commodity ETFs Direct 102(2) Currency ETFs Direct 104(1) Inverse ETFs Direct 105(2) New Margin Rules 107(3) The Zero Commission 110(1) Convergence Well Underway 110(3) The Bullish Bias Gets a Makeover 113(24) Other Contributing Forces 114(1) Commissions Out, Fees In 115(2) Recurring Fees 117(1) The Greenspan and Bernanke Put 117(1) Money Supply Shenanigans 118(2) Excess Liquidity and Stock Buybacks 120(1) I'm Forever Blowing Bubbles 120(1) Bye-Bye Glass-Steagall 121(2) ``Da Boyz'' and Primary Dealers Merge 123(4) Does the Fed or Treasury Manipulate Markets? 127(3) Time to Connect the Dots 130(1) The New Robber Barons 131(1) Two Jokers in the Deck 132(1) What Bears Are Up Against 133(4) PART TWO Strategies Market Neutral 137(22) The Northwest Quadrant 140(1) Even Here, Risks Remain 141(1) ETFs and Market Neutral Strategies 141(8) Alpha Strategies 149(6) Market Neutral Mutual Funds 155(1) Conclusion 156(3) Global Macro 159(22) LTCM Blows Up 160(2) Gunslingers 162(1) Think Global, Invest Global 162(3) Trade Global 165(7) So You Wanna Be a Gunslinger, Too? 172(6) Conclusion 178(3) Doing It Their Way 181(12) Selected Trader Profiles 183(1) Selected Stock Pickers Profiles 183(1) Selected Distressed Securities Profiles 184(1) Selected Quantitative Profiles 184(1) Other Famous Hedge Fund Practitioners 185(1) Insider Trading Building Performance? 186(4) So If It's a Game for the Big Boys, How Can We Play? 190(3) Trading---Do I Have To? 193(24) One True Thing 193(4) Market Timing Myths and Realities 197(3) The Lazy or Passive Investor: No Single Strategy Always Performs Best 200(2) The Lazy Hedge Fund Investor: The Do-Nothing Crowd 202(1) Merrill and Goldman Try to Shake Things Up: Can Passive Indexes Destroy Fees? 203(2) Day Trading: Frenetic and Intense 205(3) Shorting Explained: To Go North, Head South 208(1) Quantitative Trading: Reserved for the Left Brain Crowd 209(3) Multistrategy: All Things to All People 212(2) Conclusion 214(3) PART THREE Hedge Funds for the Rest of Us Lower-Risk Global Macro Long/Short Strategies 217(26) The LTF Digest Methodology 217(1) Overwhelmed 217(2) Fast-Forward 35 Years 219(3) Trend Following 222(6) Risk Management 228(2) The Two-Thirds Objective 230(3) Finding Your Sacred Cows 233(5) ETFs Provide the Tools for Implementing Global Macro Long/Short Strategies 238(4) The Trick Is Putting Them Together 242(1) Constructing Your Own ETF Hedge Fund 243(24) Typical Questionnaire 244(2) Long-Term Investor or Short-Term Trader 246(1) Awash in ETF Choices 247(4) Performance Myths and Realities of Style 251(4) One World Market 255(2) True Diversification 257(7) Shorting Essentials 264(1) Portfolio Reallocation 264(1) Actively Managed ETFs and Mutual Fund Posers 265(1) Conclusion 265(2) ETF Hedge Fund Portfolios 267(16) Long-Term or Short-Term Approach 268(4) Aggressive Growth 272(3) Growth 275(2) Growth and Income 277(2) Dave's Special Portfolio 279(1) ETF Substitutes 280(1) Conclusion 281(2) Tools and Resources 283(26) Where to Get the Help You Need 283(1) Online Tools 283(21) Important Tools I Like 304(1) Market Information Resources 305(3) Conclusion 308(1) Eight Steps to Building Your ETF Hedge Fund 309(8) Step 1: Define Yourself 309(1) Step 2: Develop Your Hedge Fund Strategy 309(1) Step 3: Use ETFs as the Primary Tool 310(1) Step 4: Using Mutual Funds as an Alternative Vehicle 310(1) Step 5: Get Help, Even If You're a DIY 311(3) Step 6: If You Want to Use a Financial Advisor, Find the Right One 314(1) Step 7: DIYs Need an Online Broker 314(1) Step 8: Find the Support Tools You Need 315(1) Conclusion 315(2) Index 317