Exchange-Traded Indexed Securities

New and Improved ETF

Barclays Global Investors (BGI) currently manages all 17 of the WEBs available on the AMEX and has filed with the SEC with plans to offer 51 new ETFs including 45 domestic and 6 international sector and wide-market indices. BGI is planning a competitive pricing strategy and the internal expense ratio estimates range between 8 and 12 basis points. Their goal is to design tax efficient and less expensive funds to grab market share. A key difference between the Barclays securities and the currently available ETFs is that they will be registered with the SEC as open-end funds. BGI is still keeping the benefits of exchange-traded securities while overcoming the problem of dividend drag.

Exchanged-trade index funds offer investors even greater flexibility than open-end index funds and may offer cost and tax advantages. Investors should be aware, however, that the unique advantages of ETFs, such as greater trading flexibility and the ability to sell short, might turn out to be very costly features in the long run. Investors are still wise to avoid the temptation of market timing and use ETFs as part of a diversified, long-term investment strategy.