My first foray into closed-end ETFs involved a 4.5% front end load. Little did I know that these funds are available on the secondary market. What a closed end ETF does is set a fixed number of shares at, say, $20 per share, and then gets sold through brokerage firms, many of which are underwriters, to raise the initial capital for the offering which equals the NAV when it goes on the market. So if you buy in before it goes to market, you pay $19.10 (for a 4.5% load) for shares at $20.00. Sounds stupid, doesn't it?

After the big boys get their cut and the ETF goes on the market, the share price acts just like equity; it is bought and sold in real time. You'd be smart to buy into the initial offering IF the share price were to immediately appreciate; however, there are so many of these ETFs nowadays that they are a dime a dozen.

So how does one make money if the share price appreciation is minimal? I am so glad that those of you who are still awake asked that question. Ho ho. Fixed income ETFs aim for a high dividend payout. Many of them are currently paying 9-10% dividends, and that means the investor is taxed only at the 15% dividend rate! Your savings account is probably only paying around 4% at your normal income tax rate. Blah.

Also, many of the fixed-income ETFs are leveraged so that they can pay these high dividend rates.

In September 2005 I bought into one of these fixed-income, leveraged ETFs with a 9% dividend payout goal. After the deducting initial 4.5% loss from the front end load, fourteen months later it has returned 8% at the dividend tax rate (the lucky market timers who bought into the ETF on the secondary market at its lowest share price earned over 13%). I'm reinvesting the dividends for a compounding effect, so in the next few years the return will be even better. This is way better than a savings account, but you must accept the risk that goes along with the returns. The share price could easily depreciate in value, and thus you may not earn as much as you had hoped for.

Did you see Google today????

yeah, it went nuts! I sold goog short in my fake portfolio trying to make a small gain.

So where does one go to research/buy ETFs? Sounds interesting.

You can do research at www.etfconnect.com or www.seekingalpha.com. There isnt a lot out there because ETFs are relatively new. I also use Google Finance and Yahoo Finance.

You can buy them like you would buy a stock so at any brokerage firm where you have an account. Scottrade is only $7/trade.

(addendum)Here are my saved investing links if you want to browse:
http://del.icio.us/megabeth/investing