What are Exchange Traded Funds (ETFs)?

ETFs are a type of investment traded on a stock exchange that holds assets such as stocks or bonds. It trades throughout the day at a market price generally approximate to the net asset value of its underlying assets. Like a mutual fund, the ETF holds a number of securities to provide diversification. Unlike a mutual fund, which is priced only at the close of the day, an ETF's price per share will change throughout the day depending on the quoted prices on the exchange. Accordingly, there may be differences between the price per share of an ETF and its underlying assets known as "tracking error."

ETFs have special characteristics and may be:

• Traded on the "secondary market" instead of having shares issued and redeemed directly from the sponsor as with a common open-ended mutual fund.
• Not usually required to sell securities or maintain a cash balance to fulfill redemption requests.
• Designed to track an index, such as the S&P 500, or a portion of the stock or bond market.
• A type of investment that involves active management or invest in less common asset classes, but these ETFs are less common and potentially more risky.

ETFs generally have low operating costs, but the expenses vary from one type to another. Purchasers should be aware of the expenses related to the particular investment. Since ETFs trade like individual stocks or bonds, a commission will generally be charged upon the purchase or sale of an ETF. If you trade frequently or in small dollar amounts, the commission costs could be relatively high. Although they share some similarities, ETFs are not closed-end mutual funds.

Who should purchase ETFs?

ETFs are not an investment choice that is suitable for everybody. If a participant desires active management or the ability to purchase investments with no up-front costs, ETFs may not be right for them. It is also important to understand that investments, including ETFs, offered through the Self Directed Investment Account have not been evaluated and will not be monitored by the Board or its consultants.

Get the help you need

To see an overview of all Plan investment options, read the Guide to Investment Options (PDF), talk to the HELPLINE, or meet with your Account Executive.

Investing involves market risk including possible loss of principal. Please check with your investment professional for a complete product description and/or prospectus.

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