Exchange Traded Funds ETFs

1
Exchange Traded Funds (ETFs)

• What are they?
• By Corey Tyhurst

2
Formal Definition

• An ETF is similar to a mutual fund as it
  typically represents a basket of underlying
  securities. Unlike a mutual fund, however, an ETF
  trades like a stock and investors can buy, sell,
  short, or long it throughout the trading day.

3
History

• 1993 The first ETF
• The Standard and Poor's Deposit Receipt (SPDR)
• SPDR gave investors an easy way to track the SP
  500 without buying an index fund, and they soon
  become quite popular
• 1995 2 ETFs Worth 1 Billion
• 2006 263 Worth 335 Billion In Assets

4
Characteristics

• Much like stocks, ETFs can range in
• Risk
• Return
• Expense Ratio (Management Fee)
• Sectors
• Investment Styles
• All ETFs should be evaluated individually to see
  if they are a good choice for your portfolio.

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Pros

• Huge Selection
• Very Liquid
• Can Be Bought In Any Quantity
• Can be Shorted or Longed
• There Can Be Tax Benefits (Capitals Gains are
  Taxed After the ETF is Sold)
• No Cash Drag (Holding Cash for Payouts)

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Cons

• Hiddens Fees from
• Bid-Ask Spreads can be significant
• Internal Transaction Costs
• Dividends are not automatically reinvested (like
  most mutual funds)
• Supply and demand of the ETF itself affects
  price, so ETFs that represent stocks may be
  extra risky because the value of the underlying
  security is not the only factor

7
Differences From Mutual Funds

• ETFs are often subject to trade commissions
  because they are traded like a stock
• If you are planning on making small incremental
  investments, a zero commission mutual fund may be
  a better choice
• Mutual Funds usually require a large initial
  investment, and you can only buy more of the fund
  at certain amounts
• Mutuals Funds are sold by a fund company, where
  ETFs are sold by participants in the market

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References

• http//www.nyse.com/pdfs/what_you_should_know_abou
  t_etfs.pdf
• http//www.investorwords.com/1810/Exchange_Traded_
  Fund.html
• http//www.altruistfa.com/etfs.htm

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Our ETF Holdings

• iShares COMEX Gold Trust
• COMEXgt Traded on the Commodity Exchange of New
  York
• Current Price 59.80

• iShares GSCI Commodity Index Trust
• GSCIgt Managed by Goldman Sachs
• Current Price 41.84

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Questions?