ETF: Exchange-Traded Funds

A Revolutionary Development in the Financial Industry

Exchange-Traded Funds (ETFs) were created and launched by innovative financial professionals who wanted an alternative to the high costs of traditional commissioned oriented mutual fund companies. ETFs are the fastest growing investment vehicle today. They were introduced in 1993 and are now used as a powerful new approach to modern portfolio management. The popularity of ETFs continues to expand as they offer instant diversification in worldwide stock indices in sectors such as technology, healthcare, energy, basic materials and commodities.

An ETF is an investment vehicle that represents portfolios of securities tracking specific indices. ETFs trade like stocks and can be bought and sold on global exchanges. For example:

EXCHANGE TRADED FUND Nasdaq 100-Index Top 10 Holdings (Feb 2009) 100 of the largest domestic & international nonfinancial companies

The unique features ETFs provide are:

• Diversification.
  ETFs track indices which are comprised of individual securities. This gives investors exposure to many different stocks and sectors and protects the portfolio from individual security risk.


• Tax Efficiency.
  ETFs are generally more tax efficient than traditional mutual funds


• Transparency.
  ETFs disclose on a daily basis the exact holdings of the fund so you always understand precisely what you own and how much you're paying for your investments. This is not the case with a mutual fund.


• Low Management Fees.
  Management fees charged by ETFs are in general lower than most mutual funds making ETFs more cost efficient.


• Performance.
  Due to the low fees, over time ETFs often outperform actively managed mutual funds.