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Wall Street Journal

Listen In On Calls
January 22, 2006

With earnings season in full swing, you may want to eavesdrop on what the companies you're interested in are saying in their briefings with Wall Street analysts.

Until recent years, these quarterly earnings conference calls were decidedly private affairs. "It was a handful of carefully picked analysts, often those who had given the company favorable coverage," says Rebecca McEnally, a policy director at the CFA Institute, a nonprofit group representing asset managers and financial analysts.

But thanks to a 2000 change in federal securities rules, calls are now open to the public.

Most companies post dial-in directions on the "Investor Relations" sections of their Web sites. Some offer Webcasts to let you listen in. And the financial Web site Seeking Alpha posts free transcripts of major companies' conference calls on its site,, within hours of the meetings.

What can you actually get from the calls? A lot of spin, certainly, but also some useful insights into what a company is focused on and how particular projects or businesses are performing.

Plus, you can sometimes pick up intriguing information about other companies. Seeking Alpha founder David Jackson says that about a year ago he was listening to e-commerce companies talk about the rising popularity and cost of advertising on search engines. "Those calls were full of information on why to buy Google stock," he says.

It's also worth listening to the questions. If analysts are hammering away at why the company has missed a particular sales target, for example, it may be a clue that the stock price is about to go down, even if the company reported solid earnings.

Wall Street Journal

A Personal Guide to Personal-Finance Blogs
August 18, 2005

The blogosphere, that smorgasbord of screeds, musings, news and advice, is doubling in size every few months. There are now 12.5 million blogs, up from six million four months ago, and almost 100,000 new blogs are created every single day, according to estimates from blog search-engine firm Technorati.

Personal-finance blogs are still little more than a blip in the blogosphere, but are growing quickly: Technorati estimates there are about 5,000 of them, up 40% from six months ago. Some are written by financial professionals and offer investing tips or advice on financial planning; others provide links to and commentary on financial news; and many are chronicles of the writer's personal financial triumphs and failures.

The most obvious attraction of blogs is their immediacy: A blog post can be published in seconds, as can reader comments, and the most recent post appears at the top of the page, so it is easy to see at a glance what the latest news is. A good blogger will also act as a filter of all the articles and stories on the Web, and will comment on them or post links to alternative points of view. And the personal nature of blogs affords a voyeuristic and often fascinating glimpse into other people's lives.

The problem, of course, is in knowing whom to trust. After all, many bloggers post anonymously, especially those dissecting their own finances, and there's no guarantee they know more than you do.

Here's a selection of some popular personal-finance and investing blogs, along with their pros and cons [view larger version of chart]:

Wall Street Journal


Hedged In

October 25, 2004; Page C1

Five years ago, members of the country-club set were bragging about the hot stock they had bought. Nowadays, it is all about having money with a hot manager.

"The sexy thing to say is, 'Yeah, I'm in a hedge fund,' " says Boulder, Colo.-based Wealth Conservancy financial adviser Steve Henningsen, who reckons that just as many investors in 1999 weren't exactly clear on what the companies they were buying shares in did, many of today's hedge-fund investors are less than clear on their funds' mandate.

Meantime, the marketplace is more than happy to cater to well-heeled investors' desire to be in the hedge-fund game. Mr. Henningsen says he gets a call a day from a hedge fund that wants him to steer his clients toward it. Van Hedge Fund Advisors estimates that there are about 8,500 hedge funds with about $900 billion in assets, before leverage. In 1999, funds had about half as much.

The explosion in funds has set skeptics to complaining about how there is a bubble in hedge funds. But if it is a bubble, it is one with a difference -- one that will more likely be marked more by lost opportunities than by significant losses.

More than anything, hedge funds exist to exploit inefficiencies and produce positive returns, regardless of which way the market is headed, and to do this while taking on a minimum amount of risk. So, funds frequently employ strategies that depend on one asset or group of assets doing well relative to another, like taking a long position in one stock and taking a short position in another one in the same industry. An increase in the number of hedge funds making such relative performance bets doesn't affect the direction of the stock market so much as it makes opportunities to find stocks whose values are at odds with one another more difficult. And this appears to have happened: In a recent study, J.P. Morgan strategist Jan Loeys found that opportunities to take advantage of pricing inefficiencies have eroded in the equity and interest-rate markets, where hedge funds are most active.

To some degree, one must assume that the wealthy investors putting money into hedge funds know this. In his Web log, Seeking Alpha, hedge-fund manager David Jackson suggests that this indicates pessimism over the investing climate.

Many of the people upping their stakes in hedge funds don't control just large sums of money, they control large corporations. Economists have been scratching their heads over why companies have been so slow to spend the large cash positions they have built up, but maybe it comes down to the same pessimism.

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Wall Street Journal


Are New Index Funds Really Improved?

November 23, 2003

Maybe the mousetrap didn't get better.

When exchange-traded index funds hit the market en masse in 2000, they were heralded as a marked improvement over regular index mutual funds, offering lower annual expenses, smaller tax bills and ease of trading. More recently, ETFs have enjoyed another round of glowing publicity, as they are touted as a squeaky-clean alternative to scandal-tainted mutual funds.

But are ETFs really your best bet? My conclusion: They are a good choice for traders and for wealthier investors. But if you have a modest nest egg or you regularly add new savings to your portfolio, you should probably stick with conventional index mutual funds.

Cutting Costs

When you trade a regular mutual fund, your buy or sell order goes to the fund company involved. By contrast, ETFs are listed on the stock market, which means investors must trade the exchange-listed shares if they want to buy or sell.

This is good news for ETFs. Because they don't have the cost of dealing directly with investors, they can charge lower annual expenses. Consider one of the marquee match-ups of the indexing world, that between iShares S&P 500 Index Fund and Vanguard 500 Index Fund.

Both funds aim to replicate the performance of the Standard & Poor's 500-stock index. But iShares 500, an ETF sponsored by San Francisco's Barclays Global Investors, charges just 0.09% of assets a year. Meanwhile, Vanguard 500, a regular index mutual fund offered by Vanguard Group in Malvern, Pa., levies a higher 0.18%.

Mixing It Up

Of course, you shouldn't own just the S&P 500. Let's say your goal is to build a globally diversified portfolio that includes 40% U.S. stocks, 5% real-estate investment trusts, 15% developed foreign-stock markets, 5% emerging-market stocks and 35% bonds.

To build that portfolio using ETFs, you could combine 30% iShares 500, 5% iShares S&P MidCap 400 Index Fund and 5% iShares Russell 2000 Index Fund to get your core 40% U.S. stock exposure. What about the portfolio's other sectors? You might add 5% StreetTracks Wilshire REIT Index Fund, 15% iShares MSCI EAFE Index Fund, 5% iShares MSCI Emerging Markets Index Fund and 35% iShares Lehman 7-10 Year Treasury Bond Fund.

This mix was suggested by David  Jackson, a technology research analyst and an avid fan of ETFs. Mr. Jackson, who operates a Web site that's devoted to ETFs (, calculates that this portfolio has weighted average annual expenses of 0.2%, equal to $2 a year for every $1,000 invested.

That 0.2% is far less than the 1.2% or 1.3% you might pay for a balanced portfolio of average-cost mutual funds.

But what if you compare the ETF portfolio to an array of low-cost Vanguard index funds? Suppose the alternative consists of 40% Vanguard Total Stock Market Index Fund, 5% Vanguard REIT Index Fund, 15% Vanguard Developed Markets Index Fund, 5% Vanguard Emerging Markets Stock Index Fund and 35% Vanguard Total Bond Market Index Fund.

The overall expenses on these Vanguard funds amount to 0.25% a year. This means that for every $1,000 invested, the Vanguard portfolio would cost 50 cents more per year than the ETF portfolio.

As you might have noticed, the two portfolios differ slightly. Mr. Jackson's portfolio uses three funds to replicate the U.S. market, while we got the same exposure at Vanguard by buying the Vanguard Total Stock Market Index Fund. Why does Mr. Jackson advocate the three-fund mix? It allows investors to take advantage of iShares 500's rock-bottom costs.

You might also have noticed that the Vanguard portfolio includes a well-diversified bond fund, while the iShares bond fund invests only in Treasurys. Mr. Jackson prefers the iShares fund, because it has lower expenses. I suspect, however, that the better-diversified Vanguard fund will deliver a higher long-run total return.

Trading Down

The ETF portfolio may have lower annual expenses. But that doesn't mean ETFs are necessarily cheaper. The reason: You need to figure in the cost of buying and selling ETF shares.

Imagine you bought the seven ETFs in Mr. Jackson's portfolio and unloaded them 10 years later. Let's assume each of these 14 trades cost $20 in brokerage commissions, for a total cost of $280.

Let's also assume that you incurred an additional round-trip trading cost of 0.2%, thanks to the gap between the buy and sell price on ETFs. This trading spread reflects the profit earned by the market maker for each fund. Add up these various costs, figure in the 10-year time horizon and you find the ETF portfolio makes sense if you have over $93,000 to invest.

Admittedly, this number is built on a slew of assumptions, and you could quibble with any one of them. But even a lot of quibbling wouldn't change the basic conclusion.

The bottom line: If you have a large portfolio and thus trading costs don't loom large, ETFs look like a decent investment. That's especially true once you factor in taxes. Thanks to a quirk in the way they operate, ETFs should make smaller taxable distributions each year than comparable index mutual funds.

But if you aren't a big-ticket investor, the economics of ETF investing don't seem nearly so appealing. Suppose you have a modest nest egg, or you regularly add money to your portfolio, or your time horizon is relatively short. In all likelihood, if you opted for ETFs, the trading costs involved would wreak havoc with your returns. Instead, you would probably fare better with conventional index funds.

That said, you don't necessarily have to pick one or the other. "People think about index funds vs. ETFs as a black-and-white issue," Mr. Jackson notes. "But for many people, there might be a hybrid option. The right strategy might be to invest your $100 a month into Vanguard index funds and then, once you get a fund up to, say, $25,000, you switch your money to an ETF."

Write to Jonathan Clements at