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ETF Strategy

ETF's (Exchange Traded Funds)
 
ETF's are index funds which are traded on a stock exchange like an individual security. They are hybrid investment vehicles that combine the trading flexibility of individual stocks with the diversification benefits of a managed portfolio or a mutual fund.
 
ETF's allow you to customize your portfolio. There are over 600 ETF's sponsored by a variety of institutions. Key to our investment philosophy is selecting the sectors that we feel have the most appreciation at that particular time.
 
ETF's are inexpensive. ETF's have extremely low annual expenses, generally around 0.3% per year.
 
ETF's are extremely tax-efficient due to their unique legal structure. Unlike actively managed funds, which annually accumulate taxable short-term gains and distributions to shareholders, ETF's ordinarily only generate taxable capital gain when they are sold. The average capital gains distributed as a percentage of assets for 2001 was .31% as apposed to 5.9% for corresponding index mutual fund. (Source Bloomberg May 2002 issue of Financial Planning Magazine.)
 
ETF's and Asset Allocation
 
ETF's are an ideal asset allocation tool.
 
ETF's are essentially surrogates for asset classes.
 
ETF's provide pure exposure to asset classes:

  • Fully invested
  • Transparent holdings
  • No style drift
  • Index-tracking performance (top 20 percentile) 

 
ETF's minimize costs and taxes
 
ETF's have no redemption fees
 
Value is added through asset allocation decisions rather than stock picking and or fund/manager selection.

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