The fourth chapter is all about mutual funds, funds of funds, annuities, and ETFs. It's a pretty comprehensive overview, and gets into detail about what factors influence (or don't influence) the performance of a mutual fund. Basically, you come away from this chapter feeling like a pretty smart cookie for having bought mutual funds! They also touch on what a "fund of funds" is all about - either lifecycle funds, which are matched to your retirement age, or asset allocation funds, which have a specific investing style (growth, conservative, aggressive, etc) that matches your risk tolerance. I'm a big fan of lifecycle funds myself.
They go into easy-to-understand detail about annuities - fixed, variable, and immediate. As always, the number one thing is to understand what you're being sold. A great quote from this chapter is "It's safe to say that msot annuities are sold and not bought." The distinction is important, because somebody who wants to sell you something is often coming out of the bargain richer than you will. The authors are very dismissive of fixed annuities, because of the illogical way interest rates are presented for the purpose of fooling you, and of variable annuities, because of the high likelihood that your money is drowning in fees. Immediate annuities, though, can be a useful tool in retirement planning, so their main caveat is to make sure you're putting your money with a reputable company.
The last section is on ETFs - Exchange Traded Funds - is mostly an explanation of what they are (mutual funds that can be bought and sold just like stocks) and an explanation of why you shouldn't buy them if you're really interested in the Boglehead vision. Basically, ETFs are for people who give a crap about the price of the share - and if you're a buy and hold investor, particularly one investing for retirement, you should just keep plugging your money in no matter what the price looks like. The authors say that "being able to trade ETFs during the day is of no benefit to Boglehead investors ... if you're interested in day-trading funds, you're reading the wrong book." Which I think is a pretty apt statement. The only thing that I think ETFs are good at are replicating very small sectors of the market where it evidently wasn't worth it to bring in a mutual fund structure - or you can't find a mutual fund that tracks what you want it to. So in that instance, I'd still recommend investing lump sums to avoid trading fees, but they could be useful.
Check out the book, I read it in two sittings so you can tell it's good! (because I'm squirrelly!)
Tomorrow's reviewer is Mighty Bargain Hunter, so if you're lazy and didn't read this until after Thursday, you can click on over. =)