Watt's Up! - February 2012 Newsletter :: Creating a Strategy for Annuities

February 2012

Watt's New
ETFs in Your 401(k)

The newest trend in 401(k) plan investment menus is a greater focus on ETFs. Typically, these index-based funds are significantly less expensive to own than actively managed mutual funds with similar objectives, which helps reduce the cost of retirement saving. The goal of lower fees and higher returns also gets a boost from the increasing number of major plan providers that offer commission-free ETF trades.

Word of the Day:
DIAMOND

The DIAMOND is an index-based unit investment trust (UIT) that holds the 30 stocks in the Dow Jones Industrial Average (DJIA). It's similar in structure to an exchange traded fund (ETF). Investors buy shares, or units, of the trust, which is listed on NYSE Amex as DIA. The share price changes throughout the day as investors buy and sell, just like share prices of stocks. Part of the appeal of DIAMOND shares is that while the UIT mirrors the performance of its benchmark index, buying trust shares costs dramatically less than buying shares in all 30 stocks in the DJIA.

Strategic Uses of ETFs

ETFs are hybrid investment vehicles that have characteristics of both individual securities and mutual funds. With an ETF, investors buy and sell shares in the collective performance of an entire portfolio of securities — sometimes described as a basket of securities — in the same way they buy and sell shares of a single stock. Because of their growing popularity, you can find ETFs for nearly every published index, no matter how narrow a segment of the market it may track. And new specialized ETFs are being introduced almost daily.

ETFs offer some obvious benefits, including simplified portfolio diversification. You don't have to evaluate individual securities and then buy them in sufficient numbers to protect yourself against portfolio risk. But ETFs can also be used in other strategic ways when looking at the investing big picture.

Learn more.

Financial Wit & Wisdom

A 1998 US commemorative stamp featured Madam C.J. Walker, the US's first female millionaire. She founded the Walker Company — a beauty supply company — in her home on a $2 budget and sold products door-to-door. When she died in 1938, it was the largest African-American owned business in the country.

Lightbulb Press - Watt's Up! Newsletter
New at Lightbulb:
Guide to Understanding Annuities

Investor interest in annuities is often paired with confusion about how these retirement products work.

Newly updated and reviewed by FINRA, the Guide to Understanding Annuities can be customized with your branding and contact information.

Disclaimer:
This information is provided with the understanding that the authors and publishers are not engaged in rendering financial, accounting or legal advice, and they assume no legal responsibility for the completeness or accuracy of the contents. Some charts and graphs have been edited for illustrative purposes. The text is based on information available at time of publication. Readers should consult a financial professional about their own situation before acting on any information.

Lightbulb Press, Inc.
37 West 28th Street
New York, New York 10001
Tel: (212) 485-8800
www.lightbulbpress.com