Kevin McCormally: I am Kevin McCormally of Kiplinger's and I am here with Manny Schiffres, the Executive Editor of Kiplinger's Personal Finance Magazine to talk about Exchange-Traded Funds. Manny, ETFs are relatively new to the market place but understand there is been proliferation of some new kinds of ETFs. So what's happening?
Manny Schiffres: Yes Kevin, ETFs used to focus primarily on well known indexes, for example, the Standard and Poor's 500 index or the NASDAQ index or the Dow Jones Industrial Average. Now you have got much more specialized ETFs. ETFs that focus on single countries, that focus on narrow sectors and now there even new exotic ETFs. For example, an ETF that investing companies with a lot of patterns that have been approved and that have a lot of intellectual properties. So you have got from ETFs that follow well known indexes through ETFs that follow things that have uncertain futures.
Kevin McCormally: Manny, before we go into details, explain quickly what it is an ETF?
Manny Schiffres: An Exchange-Traded Fund is a mutual fund that trades on an exchange just like an index. When ETFs first came out they are all design to track alone on index and you buy and sell ETFs just like you would regular stock and they are designed to as I say track an index closely. So that makes them very much like index funds, except you don't go to mutual fund company to buy an ETF, you go to your broker and buy and sells as you go to regular stock.
Kevin McCormally: Okay, some of these exotic ETFs, what are they and how are they fit in some of these portfolio?
Manny Schiffres: Well you have some ETFs that follow, for example, water stocks. As I mentioned you have an ETF that follows companies with a lot of patterns, you have leveraged ETFs now, funds designed to deliver twice the return of the market on the upside, a different kind is designed to deliver twice the return of the market if its falls. So if the market falls 5% this fund is designed to gain 10%, How they fit in your portfolio is a good question. I would say that the traditional ETFs can be the rock of a portfolio, these new ETFs are far more speculative, you just don't know how well they are going to do. You are not really sure how the index is going to perform, so how well will ETFs performance on certain and also you don't know how well the ETF, which is after all fairly exotic is going to track the particular index that it's designed to emulate.
Kevin McCormally: Okay, thank you Manny.
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