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Product Characteristics
ETF OVERVIEW |
ETF Overview PDF |
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Potential Benefits of ETFs
ETFs have the potential to offer numerous benefits to investors, including:
- Trading flexibility. ETFs offer continuous pricing and the ability to trade throughout the day unlike most mutual funds that are traded at the end of the day. An ETF enables you to purchase on margin, trade using limit and stop orders as well as short-sell, even on a downtick. There are special risks associated with margin investing. Investors may be called upon to deposit additional cash or securities if their accounts decrease. This strategy may not be suitable for all investors.
- Less expensive. In general, ETFs have lower annual expense ratios than other investment products.Keep in mind that transaction costs of frequent trading can offset the benefits of low expense ratios.
- Diversification. ETFs are index-based and therefore provide broad diversification across securities, and this diversification is available in a single purchase.
- Tax efficiency. ETFs offer the potential for high tax efficiency because they tend to generate fewer capital gains than traditional mutual funds. ETFs are not required to sell securities to meet investor redemptions. Instead, investors interested in redeeming shares sell them on the exchange to another investor. Of course, selling shares may generate capital gains or losses for the ETF investor.
- Transparency. Because ETFs track specific indices, you generally know which underlying securities you're invested in.
- Fully invested. Again, because ETFs are index based, they seek to be fully invested in the underlying securities of the index and offer the potential to fully participate in market movements.
 
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ETFs are subject to risks similar to those of stocks and may not be suitable for
all investors. Investment returns and principal value will fluctuate so that when
shares are redeemed, they may be worth more or less than original cost.
Diversification neither assures a profit nor eliminates the risk of experiencing investment losses.
Any overviews herein are intended to be general in nature and for current interest. While helpful, these overviews are no substitute for professional tax, financial or legal advice. Investors should seek such professional advice for their particular situation. Neither Rydex Distributors, Inc. nor any of its affiliates or representatives is providing tax, financial or legal advice.
Securities are not guaranteed by any bank, are not insured by the FDIC or any
other agency, and involve investment risks, including the possible loss of the principal
amount invested.
RydexShares are distributed by Rydex Distributors, Inc., an affiliate of Rydex Investments.
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