TNIF is divided into four parts. The first explains how ETFs work, then goes on to discuss indexed investing general. TNIF explains how ETFs differ from conventional open-end index funds and why these differences make ETFs compelling for many -- but not all -- investors. It goes on to explain how ETFs are structured, how the structural differences between Canadian and US ETFs were influenced by each country's tax laws, and how in turn distributions from ETFs are taxed differently in Canada depending on where the ETF is based. This is essential information for anyone who wants to invest using ETFs.

The second part discusses asset allocation, portfolio construction and taxation with ETFs. There's not much new here for those who are already acquainted with indexing and asset allocation. Perhaps in order to make ETFs more palatable to commissioned and fee-based financial advisers, there's an emphasis on so-called "core-and-explore" and "sector rotation" strategies. Most do-it-yourself investors will read this material with a healthy dose of scepticism.

Part three describes the history of ETFs -- did you know that the TSE's TIPS 35, a precursor of today's i60, was the first successful ETF in the world? -- and then looks into the future, where the next "new thing" is predicted to be ETFs based on actively-managed mutual funds.

Each chapter ends with a brief interview with or a profile of an indexing pioneer like Nathan Most or Jack Bogle. These serve to add some variety and a human element to what otherwise is a rather dry presentation of what's admittedly a rather dry subject. There's also a nice history of last year's successful campaign to stop the egregious taxation of US ETFs as well as a description of a looming change in Canadian tax regulations that again threatens their viability.

Those who want to invest on their own will find that TNIF is a good book to read in conjunction with Ted Cadsby's The Power of Index Funds: Canada's Best-Kept Investment Secret (see Bylo's review.) Cadsby's book does a better job of making the case for indexing but TNIF shows how to build an indexed portfolio that for many investors will be lower in cost and higher in tax efficiency than traditional open-end index funds..

No matter how knowledgeable an investor you may be, if you want to invest using ETFs, then you'll need to read this book.

26Nov01