Twelve Things You Need to Know About ETFs

By Ben Steverman - 2012-02-27T22:16:37Z

Illustration by Dennis Pacheco

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When is a niche ETF getting "too cute"?

ETFs based on niche markets or clever methodologies "can get too cute," Armstrong says. Examples of unique methodologies can be found among the dozens of ETFs that shut down each year. In 2011 that included the JETS Contrarian Opportunities Fund, which screened for stocks by identifying poorly performing stocks and ranking them on 10 criteria. Also shuttered: the FaithShares Christian Values Fund, which screened on "best practices" according to the guidelines of Christian denominations. Not all creative ETFs fail. The PowerShares Buyback Achievers Portfolio (PKW) doubled assets in 2011 and delivered a 10 percent total return by tracking companies that bought back their shares.

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