Everything You Need to Know About ETFs in One Book

Take full advantage of ETFs
Increase your investment returns

If you're considering investing in ETFs, read this book immediately! Understanding the nature and structure of ETFs is essential to developing the discernment to select good ETFs and understanding their marketability.
This book covers everything about ETFs, from the basics to practical principles that can be applied in practice, including their concept, structure, nature, history, and how to select a good ETF. You may be interested in investing in ETFs, but don't know where or how to start.
Information on stocks and products abounds, but navigating them can be challenging. ETFs have become a central pillar of the financial industry thanks to their overwhelming marketability, and even today, innovative and diverse products continue to be launched.
This book will serve as a valuable guide for those looking to start investing in ETFs, the most complete financial product and the most superior long-term investment strategy.
And the moment you read this book, no other financial product will catch your eye.

It is clear that stock markets, which are collections of individual stocks like the S&P 500 and Nasdaq, have yielded higher returns than government bonds over the long term.
However, over the past 90 years, only 4.3% of stocks have outperformed government bonds, creating a divergence between the stock market and stocks, as Bessembinder's paper suggests.
The reason is simple.
This is because a small number of stocks drove most of the stock market returns.

--- p.19

What is the value of funds, the precursors to ETFs, as financial products? Investment services were originally the exclusive domain of the wealthy.
The only means of increasing wealth accessible to the general public were deposits and savings.
Of course, in the past, interest rates were high, so people may not have felt much inconvenience about limited financial services.
This is because, just by depositing money in a bank, you can earn a guaranteed return of around 10% every year with zero risk.
However, as time passed and the public's expectations rose, investment services that had been available only to a select few began to become popular in the form of funds.
This could be called the popularization or democratization of finance.

--- p.25

Simply put, indices are like maps for exploring the financial markets.
The map is not the real world.
It is the result of reinterpreting the real world in a specific way.
Just as exploration is impossible without a map, the complex world of financial markets is impossible to navigate without indices.
Just as a good map best represents the characteristics of the real world, a good index should best reflect the real financial markets.

--- p.34

Although BlackRock has been described as the king of ETFs or a giant of Wall Street, these are not the most appropriate descriptions of the company.
BlackRock started out as a bond management company, and entered the ETF business through the acquisition of BGI.
And at this point, it is doing a bigger and better job in the ETF business than any other operator.
In retrospect, the ETF business opportunity went to Vanguard first.
What if Bogle had accepted Most's offer? Or what if Barclays hadn't sold the iShares brand? Or what if State Street, which first listed SPY alongside Most, had been more serious about the ETF business? These are all hypothetical, but ultimately, the ETF business opportunity was fair to everyone. The god of ETFs was fair.
Pink was the most proactive in seizing this opportunity.

--- p.94

An ETF is a listed index fund.
This product has the characteristics of an index fund that tracks a specific index, such as KOSPI or S&P 500, at low cost, but can be traded freely like stocks.
As a result, many of the core product features and advantages of ETFs can be seen as derived from index funds.

--- p.98

The biggest reason for the dissatisfaction is that, regardless of who creates the index, there is ultimately not much difference in returns.
Although index operators all create their indices based on their own methodologies, the weighting of individual stocks in the index is ultimately similar.
Ultimately, the biggest factor in determining index usage fees is the brand power of the business that created the index, rather than its actual value.

--- p.169

Bonds are safe assets that provide fixed interest rates and have the advantage of protecting investors' portfolios during uncertain times.
That's why bonds, along with stocks, form the foundation of every investment portfolio.
A typical example is 60/40, which is a strategy that puts 60% in stocks and 40% in bonds.
Stocks tend to trend upward consistently, and bonds generally have a negative correlation with stocks.
In fact, until the Fed raised rates in 2022, 60/40 was the simplest yet most effective portfolio.

--- p.196~197

Commodity ETFs, like stock and bond ETFs, track a specific index as a benchmark.
Looking at it this way, it doesn't seem much different from stock and bond ETFs.
But there is a subtle but profound difference hidden here.
The point is that commodity ETFs generally invest in futures rather than physical assets.
Investing in commodity ETFs without understanding these differences can lead to significant losses.

--- p.227

Leveraged and inverse ETFs are intended for short-term trading, not investment purposes, and should not be used for asset allocation purposes.
Despite this, there is a steady demand for these products in the market.
Inverse ETFs are particularly attractive because they allow ordinary individuals to make contrarian bets on the market.

--- p.238