Building Wealth Mr. Sullivan ETF’ S : T HE P ROBLEMS WITH M UTUAL F UNDS

P ROBLEMS WITH M UTUAL F UNDS  Sales Charges and Loads  High Annual Fees  Taxes  Too Many Choices

E XPENSE R ATIOS  Expense Ratio: the percentage the mutual fund charges to run the fund on a daily basis.  Some funds charge as high as 1% to manage the fund.

E XPENSE R ATIO  The American Developing World Growth and Income Fund (DWGAX)  $14,216,000,000 in Assets  1.39% Annual Fee  $197,602,400 in Annual Fees

E XPENSE R ATIO  If you invested $1,000,000 in DWGAX, every year you would pay $13,000 in management fees.

12B-1 F EE ’ S  In addition to the expense ratio, some firms charge a 12B-1 fee.  This fee is used to market the mutual fund.  Ranges anywhere from.25%-1%.

F UND C LOSING  Some funds that close their doors to new investors, still charge a 12B-1 marketing fee.

ETF’ S  ETF stands for Exchange – Traded Funds  Mutual Funds younger…sexier cousin!

ETF’ S AND M UTUAL F UNDS Mutual Funds  Trade at one price throughout the day. Must wait until 5 o’clock to see what the price is.  Expense ratio is about 1%  Actively Managed ETF’s  Are bought and sold at anytime during regular trading hours  Expense ratio is.09%  Typically Run by Computers to track indexes.

C OMMISSIONS Mutual Funds  5.75%  If you buy $10,000 of Mutual Funds…  $575 ETFs  Same cost as buying a stock. E*Trade$10 Scottrade$7 ShareBuilder$4 Some companies charge no fees!

A DVANTAGES OF ETF’ S  Trades like a stock  Extremely low expense ratios  $1,000,000 invested would only cost $900 in fees, rather than $13,000 in mutual funds.  Instant Diversification  Tax Efficiency

I NDEX ETF’ S  Index Funds track the progress of major benchmarks  S&P 500 (SPY) Spider  Nasdaq 100(QQQQ)Cube  Dow Jones(DIA)Diamond

M ARKET C AP ETF’ S  Buys either:  Small  Mid,  Large,  Multi-cap

B OND ETF’ S  Buys  Corporate  Municipal  Government Bonds

ETF’ S  Vanguard Total Stock Market Portfolio (VTI)  Buys every stock that exists on every market

S ECTOR ETF’ S  Tracks the progress in a particular sector.  Buys all the stocks in the same industry.  Cell Phone Carriers  Oil  Banking  Green Energy

R EGIONAL ETF’ S  Buys stocks in one region  China  Japan  Europe  Developing Countries(BRIC)

ETF’ S  ETF’s can be any combination of the above mentioned  Small Cap Europe  Chinese Banking  Mid Cap Bond Funds

C ONCLUSION  Instant diversification  Extremely low costs  Tax Efficiency  Trades like a stock  Better alternative to mutual funds