Disclaimer: All my books and views are for educational purposes only. Consult your financial advisors before taking any actions. All the links are the opinions of the authors, not mine. I am not responsible for any errors and/or opinions. All information and prices are subject to change without notice.

Appendix 2 - ETFs / Mutual Funds

What is an ETF

ETFs have basic differences from mutual funds: 1. Lower management expenses, 2. Trade ETFs same as stocks, and 3. Usually more diversified but not more selective than the related mutual funds such as NOBL vs FRDPX.

The major classifications of ETFs are 1. Simulating an index such as SPY, QQQ and DIA, 2. Simulating a sector such as XLE and SOXX, 3. Simulating an asset class such as GLD and SLV, 4. Simulating a country or a group of countries such as EWC and FXI, 5. Managed by a manager(s) such as ARKK, 6. Betting a market or sector to go down such as SH and PSQ, and 7. Leveraged (not recommended for beginners).

Fidelity: Index ETFs (https://www.fidelity.com/etfs/overview).

Wikipedia on ETF (http://en.wikipedia.org/wiki/Exchange-traded_fund).

List of ETFs

ETF database (Recommended): http://etfdb.com/

ETF Bloomberg: http://www.bloomberg.com/markets/etfs/

ETF Trends: http://www.etftrends.com/

A list of ETFs. Seeking Alpha.

http://etf.stock-encyclopedia.com/category/)

A list of contra ETFs (or bear ETFs)

http://www.tradermike.net/inverse-short-etfs-bearish-etf-funds/

Misc.: ETFGuide, ETFReplay

Fidelity low-cost index funds: https://www.youtube.com/watch?v=zpKi4_IJvlY

Fidelity Annuity funds with performance data.

http://fundresearch.fidelity.com/annuities/category-performance-annual-total-returns-quarterly/FPRAI?refann=005

ETFs vs mutual funds; https://www.youtube.com/watch?v=Vmz0CzlQvHk

Three ETFs: https://www.youtube.com/watch?v=MVi2RhpffuU

Other resources

Most subscription services offer research on ETFs. IBD has a strategy dedicated to ETFs and so does AAII to name a couple. Seeking Alpha has extensive resources for ETF including an ETF screener and investing ideas. So is ETFdb.

Not all ETFs are created equal

Check their performances and their expenses.

When to use or not to use ETFs

I prefer sector mutual funds in some industries, as they have many bad stocks such as drug industry, banks, miners and insurers. Most mutual funds cannot time the market.

When you believe a sector is heading up (or contra ETF for heading down), but you do not have time to do research on specific stocks, buy an ETF for the sector; it is same for the market.

Half ETF

Taking out half of the stocks that score below the average in an index ETF could beat the same full ETF itself. I call it HETF (half the ETF). You heard it here first.

To illustrate, sort the expected P/E (not including stocks with negative earnings) in ascending order and only include the stocks on the first half. Add more fundamental metrics. It will take a few minutes.

Disadvantages of ETFs

· When you have two stocks in a sector ETF one good one and one bad one, the ETF treats them the same. Stock pickers would buy the one that has a better appreciation potential.

· Sometimes the return could be misleading due to stock rotation. To illustrate this, on August 29, 2012, SHLD was replaced by LYB in a sector fund. SHLD was down by 4% and LYB was up by 4% primarily due to the switch. Unless you sell and buy at the right time (which is impossible), your return would not match the ETF’s returns due to the replacement.

· Ensure the performance matches the corresponding index; it is hard due to excluding dividends.

Advantages of ETFs

· We have demonstrated that you can beat the market by using market timing. Between 2000 and Nov., 2013, you only exit and reenter the market 3 times and the result is astonishing.

· It is easy to rotate a sector vs. buying/selling all of the stocks in this sector. Rotating a sector is the same as trading a stock.

· The risk is spread out, and your portfolio is diversified especially for a market ETF or buying three or more ETFs in different sectors.

· Periodically the bad stocks in most funds are replaced by better stocks.

· Eliminate the time in researching stocks.

Leveraged ETFs

I do not recommend them. Some are 2x, 3x and even higher. They’re too risky for beginners. However, when you are very sure or your tested strategy has very low drawdown, you may want to use them to improve performance. Most leveraged ETFs and contra ETFs have higher fees.

My basic ETF tables

I include some contra ETFs, mutual funds and Fidelity’s annuity. Some of these may be interesting to you. Most Vanguard’s ETFs have lower fees.

ETFs and funds come and go. Some ideas and classifications are my own interpretation. Refer to ETFdb for updated information. Not responsible for any error. Check out the ETF or fund before you take any action.

I prefer VFINX over SPY for the lower fees; both simulate the S&P 500 index. The stocks in the ETF can be either equally weighted or weighted by market caps. The latter is more like using momentum strategy, as the rising stocks usually have larger market caps. The index usually kicks out some poor-performing stocks and replaced them with better stocks. These ETFs are suited for long-term investing without constant reviews.

Table by market cap:

Category	ETF	Mutual Funds	Fidelity’s Annuity	Contra ETF	Alternate
Size:
Large Cap	DIA			DOG
	SPY			SH	VOO VFINX RSP FXAIX
	QQQ			PSQ	FNCMX
	RYH
Blend	IWD	BEQGX
Growth	SPYG	FBGRX			FSPGX
Value	SPYV	DOGGX			FLCOX
Dividend	NOBL	FRDPX
	VYM

Mid Cap			FNBSC	MYY
Blend	MDY	VSEQX
Growth		STDIX
		BPTRX
Value		FSMVX

Small Cap			FPRGC	SBB	FSSNX
Blend	IWM	HDPSX
Growth		PRDSX			FECGX
Value		SKSEX			FISVX

Micro	IWC

Multi
Blend		VDEOX
Growth		VHCOX
Value		TCLCX
Total					FSKAX VTI
Bond
Long Term (20)	VLV	BTTTX		TBF
Mid Term (7 – 10)	VCIT	FSTGX
Short Term (1 – 3 yrs.)	VCSH	THOPX
Total	BOND	PONDX
Corp Invest Grade	VCIT	NTHEX
High Yield (junk)	PHB	SPHIX
Muni	MUB	Check state

Special situation
Buy back	PKW

Table by sectors:

Sector	ETF	Mutual Funds	Fidelity’s Annuity
Banking¹		FSRBK
Regional	IAT
Biotech	IBB	FBIOX
	XBI	Large
Consumer Dis.	XLY	FSCPX	FVHAC
Consumer Staple	XLP	FDFAX	FCSAC
Defense + Aero	PPA
Finance	KIE	FIDSX	FONNC
	IYF
Energy	XLE	FSENX	FJLLC
Energy Service		FSESX
Farm	DBA
Gold	GLD	FSAGX	BAR
Gold Miner	GDX	VGPMX
Health Care	IYH	FSPHX	FPDRC
	VHT	VGHCX
House Builder	ITB	FSHOX
Industrial	IYJ	FCYIX	FBALC

Material	VAW	FSDPX	GSG
	IYM
Natural Gas	UNG
Oil	USO
Oil Service	OIH	FSESX
Oil Exploration	XOP
Real Estate	VNQ	FRIFX	FFWLC
REIT	VNQ

Retail	RTH	FSRPX
	XRT
Regional bank	KRE	FSRBX

Semi Conduct	SMH
Software	XSW	FSCSX
	IGV
Technology	XLK	FSPTX	FYENC
	FDN	FBSOX
		ROGSX

Telecomm.	VOX	FSTCX	FVTAC
Transport	XTN
	IYT
Utilities	XLU	FSUTX	FKMSC

Wireless		FWRLX

Footnote. ¹ Also check Finance.

Table by countries outside the USA:

Country	ETF	Mutual Funds	Fidelity’s Annuity	Alternate
Australia	EWA
Brazil	EWZ
Canada	EWC	FICDX
China	FXI	FHKCX
EAFE	EFA
Emerging	VWO	FEMEX	FEMAC	FPADX
Europe	VGK	FIEUX
Global	KXI	PGVFX
Greece	GREK
India	INDY	MINDX
Indonesia	EIDO
Latin America	ILF	FLATX
Nordic		FNORX

Hong Kong	EWH
Japan	EWJ	FJPNX
S. Africa	EZA
S. Korea	EWY	MAKOX
Singapore	EWS
Taiwan	EWT
Turkey	TUR
United Kingdom	EWU
Foreign:
Combination
Intern. Div.	IDV			FTIHX
Small Cap	SCZ
Value	EFV
Europe	VGK