Exchange Traded Funds

A large part of Brown Wealth Strategies Asset Management Program deals with investing in Exchange Traded Funds (ETFs). ETFs are funds that track an index or sector. An ETF trades like a stock on the major exchanges. So this immediately gives you the best of both the stock and mutual fund characteristics. In addition, ETFs offer investors several advantages that give you more choice, more control, and more protection in your portfolio.

Some of the other advantages to having ETFs in your portfolio include:

  • Transaction Ease: Mutual funds can only be bought or sold at the closing price every day. And most funds impose fees for anyone who holds them for less than six months. In contrast, ETFs trade like stocks on the major exchanges, predominantly the AMEX and NYSE, and you can trade them whenever you like, and as often as you wish.
  • Transparency: ETF owners know exactly what stocks or underlying assets they're holding, as opposed to mutual funds, which typically only disclose their top 10 holdings.
  • Investing in Exchange Traded Funds means you can buy actual commodities such as oil and gold without ever taking delivery of oil, or carrying an ounce of gold. Or you can buy foreign currencies without ever having to leave the U.S. So if the price of oil, gold, or the currency that is owned by your ETF you own goes up, so too will your ETF.
  • If you're a longer-term investor or position trader, Exchange Traded Funds are a very strong alternative to mutual funds for most long-term investors. With lower tax disadvantages (capital gains are limited unless you sell) and no short-holding redemptions penalties, ETFs are increasingly prevalent in more long-term portfolios.

Investing internationally has become a large trend, especially since a lot of the foreign markets are outperforming the U.S. markets and the U.S. dollar has fallen dramatically against a lot of major currencies.

Two of the chief reasons why people invest internationally are:

  1. Diversification --spreading your investment risk among foreign companies and markets that are different than the U.S. economy.
  2. Growth -- taking advantage of the potential for growth in some foreign economies, particularly in emerging markets.

In addition, today more than half of the total global stock-market capitalization happens outside the U.S. If the domestic markets fail, then foreign markets can provide other sources of return. This makes International ETFs especially useful if you're trying to gain exposure to foreign markets that would otherwise be costly or prohibitive to access on your own.

In order to take advantage of favorable international trading and the declining U.S. Dollar, Summit Trust offers six ETF portfolios to choose from.

The Six Portfolios are:

  1. Fixed
    100% Non-Equity
  2. Conservative
    20% International Equities & 80% Non-Equity
  3. Moderate
    40% Inernational Equities & 60% Non-Equity
  4. Balanced
    60% International Equities & 40% Non-Equity
  5. Agressive
    80% International Equities & 20% Non-Equity
  6. Equity
    100% International Equities