Exchange-Traded Funds Index Investing With Stock-Like Trading In the past decade, exchange-traded funds have emerged as an alternative to mutual funds. ETFs typically hold investments that mimic certain benchmarks such as the Russell 2000® Index. ETFs trade on an exchange like stocks. With a single transaction, they provide diversified exposure to the market segments they track. However, since ETFs are traded on an exchange, brokerage costs apply. ETF returns are closely tied to the benchmark they are based on. Therefore, the benefits of active, professional management are not available. ETFs provide: Tax Efficiency — Because they are designed to track benchmarks, they have low portfolio turnover. Due to low turnover, capital gains distributions occur less frequently limiting tax consequences. Diversification — Whether you seek to diversify within a style or asset class or across the broad market, ETF opportunities exist. Portfolio completion — If you have a gap in your portfolio, ETFs may fill that target of your asset allocation. Cash equitization — ETFs provide a way to keep your money invested in the market while you are in a transition phase. Important Risk Factors Investments in ETFs are exposed to similar risks associated with investments in other diversified stock portfolios. A primary risk is that the general level of stock prices may decline, thus affecting the value of ETFs. Although ETFs are designed to provide investment results that generally correspond to the price and yield performance of the underlying indices upon which they are based, they may not be able to exactly replicate the performances of the indices because of underlying expenses and other factors. Fund objectives, risks, charges, and expenses should be carefully considered before investing. A prospectus containing this and other important information can be obtained by calling (866) 676-7680 or by visiting this page on russell.com. Please read the prospectus carefully before investing. Copyright © Russell Investments 2005. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an as is basis without warranty. Russell Investment Group is a Washington, USA corporation, which operates through subsidiaries worldwide, including Russell Investments, and is a subsidiary of The Northwestern Mutual Life Insurance Company. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. Cash equitization techniques are utilized with derivatives in order to approach a fully invested portfolio position and to earn "market like" returns on the investment's excess and liquidity reserve cash balances. Exchange traded funds and index futures and options based on the Russell indexes are not products of Russell. This is not an offer or solicitation for the purchase of those instruments. Russell 2000® Index: Measures the performance of the 2,000 smallest companies in the Russell 3000® Index, representative of the U.S. small capitalization securities market. Russell Investments is the owner of the trademarks, service marks and copyrights related to its indexes.. Returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment. Securities products and services offered through Russell Financial Services, Inc. (formerly Russell Fund Distributors, Inc.), member FINRA, part of Russell Investments. For information on the Financial Industry Regulatory Authority, go to www.finra.org. RFD 05-5589. First used: November 2005.			Related CONTENT Exchange-Traded Products   Printer friendly version of this page Send feedback or comments Site Search

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