1. ETFs and ETPs Colgate Finance Club

2. What is an ETF/ETP  An ETF/ETP is an exchange-traded fund or exchange- traded product that is traded on stock exchanges.  It is a security that tracks an index or commodities basket like an index fund.  Index Fund vs. Exchange Traded Fund  Index Fund – A type of Mutual Fund that is structured to follow a Market Index (S&P 500, NASDAQ, etc.)  ETF – Trades like a Mutual Index Fund, but it trades on a stock exchange and experiences price changes throughout the day as they are bought and sold.  ETFs do not have an Net Asset Value (NAV) calculated every day like an Index Fund.

3. Benefits of an ETF  Diversification  Is a basket of stocks, bonds, and commodities rather than tracking a single company.  Trades as a Stock  Because it trades on a stock exchange investors can sell short, buy on the margin, and own single shares rather than blocks of shares.  Low Expense Ratios  Overhead or management expense ratio (MER) is lower and therefore returns to the investor are higher.  Commissions are the same as any stock.

4. ETF Sponsors  ETF Sponsors are financial institutions that create ETFs.  Process to creating an ETF:  Create the underlying index for the fund.  Securities for the fund are then delivered to the sponsor from other financial institutions.  In return, the sponsors issue them creation units – blocks of 100,000 shares – to distribute to investors through the stock exchanges.  The sponsor is responsible for managing the fund (passively) and for updating it when changes occur in the underlying index.

5. Types of ETFs  Index ETF  Fund that tracks a Market Index  Bond ETF  Fund comprised of a basket of bonds  Currency ETF  Funds that contain currency-debt instruments  Leveraged ETF  Funds that contain derivatives and debt in order to amplify changes in the underlying markets (theoretically) – 2:1 and 3:1 ratios.  Works both ways – so returns and losses are amplified (dangerous?).  Inverse ETF  Comprised of derivative meant to create a put position against an underlying market.

6. Popular ETFs  Ultra ETFs – a Leveraged ETF with a 2:1 ratio.  Spider (SPDR) - tracks the S&P 500 and is traded under the symbol SPY – each share is worth 1/10 of the NAV of the S&P 500.  ProShares – ETFs designed as Leveraged ETFs for investors who want to hedge positions without entering the derivatives market.  iShares – BlackRock ETFsBlackRock ETFs  Vipers - Vanguard ETFsVanguard ETFs

7. Chris Quick ‘06 and Kevin Walsh ETFs and iShares  September 28 @ 6:30 pm  Colgate Inn  Presented by The Investor Studies Program and the Colgate Finance Club.  More information to come.