Should an ETF be part of your
portfolio in 2010?

If you haven’t heard of Exchange Traded Funds (ETFs), you’re not alone. Sophisticated investors like brokerage firms, hedge funds and pension funds have historically held these index funds, which are traded just like stocks on the major stock exchanges. However, at year-end 2008, roughly half of the approximately $497 billion in U.S. ETFs was held by individual investors.¹

ETFs differ fundamentally from traditional mutual funds, which take orders during Wall Street trading hours, but the transactions actually occur at the close of the market. Not so for ETFs, which trade instantaneously all day long and allow an investor to lock in a price for the underlying stocks immediately.

ETFs generally provide the easy diversification, low expense ratios, and tax efficiency of index funds, while still maintaining all the features of ordinary stock, such as limit orders, short selling, and options. All the major stock indexes have ETFs based on them, including:

• Dow Jones Industrial Average
• Standard & Poor’s 500 Index
• Nasdaq Composite

As of 2009, there were approximately 1,500 exchange-traded funds traded on US exchanges², and although their safety as a securities instrument is considered the same as stock certificates, internally, ETFs are far more complex entities than mutual funds.

If your financial goals have changed, ETFs may have a role to play for you.

Let’s find out.

Give us a call.

John Karas
President & CEO
johnkaras@riverviewbank.com
(360) 693-7442

Source:

¹Wall Street Journal 11/25/09

²www.peacefulgains.com 10/23/09