ETF Analyst Reports


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New regulations were put in place following the Flash Crash , when prices of ETFs and other stocks and options became volatile, with trading markets spiking [64]:

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Over the long term, these cost differences can compound into a noticeable difference. Because ETFs trade on an exchange, each transaction is generally subject to a brokerage commission. Commissions depend on the brokerage and which plan is chosen by the customer.

Generally, mutual funds obtained directly from the fund company itself do not charge a brokerage fee. Thus, when low or no-cost transactions are available, ETFs become very competitive.

The cost difference is more evident when compared with mutual funds that charge a front-end or back-end load as ETFs do not have loads at all. The redemption fee and short-term trading fees are examples of other fees associated with mutual funds that do not exist with ETFs.

Traders should be cautious if they plan to trade inverse and leveraged ETFs for short periods of time. Close attention should be paid to transaction costs and daily performance rates as the potential combined compound loss can sometimes go unrecognized and offset potential gains over a longer period of time.

ETFs are structured for tax efficiency and can be more attractive than mutual funds. This can happen whenever the mutual fund sells portfolio securities, whether to reallocate its investments or to fund shareholder redemptions. These gains are taxable to all shareholders, even those who reinvest the gains distributions in more shares of the fund.

In contrast, ETFs are not redeemed by holders instead, holders simply sell their ETF shares on the stock market, as they would a stock, or effect a non-taxable redemption of a creation unit for portfolio securities , so that investors generally only realize capital gains when they sell their own shares or when the ETF trades to reflect changes in the underlying index. In most cases, ETFs are more tax-efficient than conventional mutual funds in the same asset classes or categories.

An important benefit of an ETF is the stock-like features offered. A mutual fund is bought or sold at the end of a day's trading, whereas ETFs can be traded whenever the market is open. Since ETFs trade on the market, investors can carry out the same types of trades that they can with a stock. For instance, investors can sell short , use a limit order , use a stop-loss order , buy on margin , and invest as much or as little money as they wish there is no minimum investment requirement.

Covered call strategies allow investors and traders to potentially increase their returns on their ETF purchases by collecting premiums the proceeds of a call sale or write on calls written against them.

Mutual funds do not offer those features. New regulations were put in place following the Flash Crash , when prices of ETFs and other stocks and options became volatile, with trading markets spiking [64]: These regulations proved to be inadequate to protect investors in the August 24, flash crash, [6] "when the price of many ETFs appeared to come unhinged from their underlying value".

ETFs were consequently put under even greater scrutiny by regulators and investors. A non-zero tracking error therefore represents a failure to replicate the reference as stated in the ETF prospectus.

The tracking error is computed based on the prevailing price of the ETF and its reference. Tracking errors are more significant when the ETF provider uses strategies other than full replication of the underlying index. Some of the most liquid equity ETFs tend to have better tracking performance because the underlying is also sufficiently liquid, allowing for full replication. ETFs that buy and hold commodities or futures of commodities have become popular.

The commodity ETFs are in effect consumers of their target commodities, thereby affecting the price in a spurious fashion. A synthetic ETF has counterparty risk, because the counterparty is contractually obligated to match the return on the index. The deal is arranged with collateral posted by the swap counterparty. A potential hazard is that the investment bank offering the ETF might post its own collateral, and that collateral could be of dubious quality. Furthermore, the investment bank could use its own trading desk as counterparty.

ETFs have a wide range of liquidity. Some funds are constantly traded, with tens of millions of shares per day changing hands, while others trade only once in a while, even not trading for some days. There are many funds that do not trade very often. This just means that most trading is conducted in the most popular funds.

In these cases, the investor is almost sure to get a "reasonable" price, even in difficult conditions. With other funds, it is worthwhile to take some care in execution. This does not mean that less popular funds are not a quality investment.

This is in contrast with traditional mutual funds, where everyone who trades on the same day gets the same price. Bogle , founder of the Vanguard Group , a leading issuer of index mutual funds and, since Bogle's retirement, of ETFs , has argued that ETFs represent short-term speculation, that their trading expenses decrease returns to investors, and that most ETFs provide insufficient diversification.

He concedes that a broadly diversified ETF that is held over time can be a good investment. ETFs are dependent on the efficacy of the arbitrage mechanism in order for their share price to track net asset value. The trades with the greatest deviations tended to be made immediately after the market opened. The tax advantages of ETFs are of no relevance for investors using tax-deferred accounts or indeed, investors who are tax-exempt in the first place. In a survey of investment professionals, the most frequently cited disadvantage of ETFs was the unknown, untested indices used by many ETFs, followed by the overwhelming number of choices.

Some critics claim that ETFs can be, and have been, used to manipulate market prices, including having been used for short selling that has been asserted by some observers to have contributed to the market collapse of From Wikipedia, the free encyclopedia. List of American exchange-traded funds. List of exchange-traded funds. Archived from the original on June 10, Securities and Exchange Commission. Archived from the original on November 11, Retrieved November 8, ETFs are scaring regulators and investors: Here are the dangers—real and perceived".

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Getting There from Here, April Bank for International Settlements. For more information or to order prospectuses for the underlying investments, call and speak to a client account representative.

Allocation percentages may vary or be adjusted due to market or economic conditions or other reasons as set out in the prospectus. Due to abnormal market conditions or redemption activity the fund may temporarily invest in cash and cash equivalents. The underlying mutual fund, collective trust, or ETF has the right to restrict trade activity without prior notice if a participant's trading is determined to be in excess of their exchange policy, as stated in the prospectus or offering memorandum.

Listed holdings do not represent all of the holdings in the underlying fund. Your company's qualified retirement plan offers participants the opportunity to contribute to investment options available under a group annuity contract with John Hancock Life Insurance Company U. These investment options may be sub-accounts pooled funds investing directly in underlying mutual fund, collective trusts, or ETFs, or they may be Guaranteed Interest Accounts.

The Funds offered on the JH Signature platform are classified into five risk categories. The risk category in which a Fund is placed is determined based on where the 10 year Standard Deviation defined below of the underlying fund's Morningstar Category falls on the following scale: If a 5 year Standard Deviation is not available for a Morningstar Category, then the 5 year Standard Deviation of the underlying fund's Morningstar Category Index is used to determine the Fund's risk category.

Standard Deviation is defined by Morningstar as a statistical measurement of dispersion about an average, which, for an underlying fund, depicts how widely the returns varied over a certain period of time.

This information is not intended as investment advice and there can be no assurance that any investment option will achieve its objectives or experience less volatility than another. Date sub-account or Guaranteed Interest Account first available under group annuity contract.

This class was introduced April 27, If the sub-account inception date is after April 27, , then the class introduction date is the same as the sub-account inception date.

The performance data for a sub-account for any period prior to the sub-account Inception Date is hypothetical based on the performance of the underlying investment since inception of the underlying investment.

All other performance data is actual except as otherwise indicated. Returns for any period greater than one year are annualized. Performance data reflects changes in the prices of a sub-account's investments including the shares of an underlying mutual fund, collective trust, or ETF , reinvestment of dividends and capital gains and deductions for the sub-account charges. The performance data presented represents past performance. An investment in a sub-account will fluctuate in value to reflect the value of the sub-account's underlying fund and, when redeemed, may be worth more or less than original cost.

Performance does not reflect any applicable contract-level or participant-level charges, fees for guaranteed benefits if elected by participant, or any redemption fees imposed by an underlying mutual fund, collective trust or ETF. These charges, if included, would otherwise reduce the total return for a participant's account. Performance current to the most recent month-end is available at www. The Expense Ratio "ER" shown represents the total annual operating expenses for the investment options made available by John Hancock.

It is made up of John Hancock's i "Revenue from Sub-account", and ii the expenses of the underlying fund based on expense ratios reported in the most recent prospectuses available as of the date of printing; "FER". In the case where an underlying fund has either waived a portion of, or capped, its fees, the FER used to determine the ER of the sub-account that invests in the underlying fund is the net expense ratio of the underlying fund.

The FER is determined by the underlying fund and is subject to fluctuation. Any change in the FER of an underlying fund will affect the Expense Ratio of the investment option which invests in the underlying fund. The ER applies daily at a rate equivalent to the annual rate shown, and may vary to reflect changes in the expenses of an underlying fund and other factors. For more information, please contact your financial representative.

Performance data reflects changes in the prices of a sub-account's investments including the shares of an underlying fund , reinvestment of dividends and capital gains and deductions for the Expense Ratio ER. Performance does not reflect any applicable contract-level or certain participant-level charges, fees for guaranteed benefits if elected by participant under the group annuity contract or redemption fees imposed by the underlying Portfolio.

The information contained herein: Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

Past performance is no guarantee of future results. Morningstar assigns categories by placing funds into peer groups based on their underlying holdings. Funds are placed in a category based on their portfolio statistics and compositions over the past three years. Analysis of performance and other indicative facts are also considered. If the fund is new and has no portfolio history, Morningstar estimates where it will fall before giving it a permanent category assignment.

Categories may be changed based on recent changes to the portfolio. Exchange traded funds and open-ended mutual funds are considered a single population for comparative purposes. Morningstar ratings are applicable to the underlying only and reflect historical risk-adjusted performance as of the most recent calendar quarter-end.

Although gathered from reliable sources, the information is not represented or warranted by Morningstar to be accurate, correct, complete or timely. Where the figures are different, the underlying fund has either waived a portion of, or capped its fees, and the result of such fee waiver or cap is reflected in the net expense ratio.

The waiver or cap is subject to expiration, in which case the Expense Ratio and performance of the sub account may be impacted. Refer to the prospectus of the underlying fund for details. When calculating the Expense Ratio of the sub-account, the net expense ratio of the underlying fund is used. Returns shown reflect the Expense Ratio of the sub-account. The amounts displayed below represent the gross and net expense ratios of the underlying fund in which the sub-account invests.

This sub-account previously invested in a different share class of the same underlying portfolio. It began investing in the current share class effective on or about November 8, Performance shown for periods prior to that date is based on the performance of the current share class. With respect to the Funds that display an index performance. Index performance shown is for a broad-based securities market index.

Indexes are unmanaged and cannot be invested in directly. Index returns were prepared using Morningstar Direct. The performance of an Index does not include any portfolio or insurance-related charges. If these charges were reflected, performance would be lower. Past performance is not a guarantee of future results. Russell Growth Index: Offers investors access to the small to mid-cap growth segment of the U.

With respect to the Funds that display a Peer Group Performance. Morningstar Direct for Mutual Funds, as of the most recent month end. Peer groups are unmanaged and cannot be invested in directly. Small-growth portfolios focus on faster-growing companies whose shares are at the lower end of the market-capitalization range. These portfolios tend to favor companies in up-and-coming industries or young firms in their early growth stages.

Because these businesses are fast-growing and often richly valued, their stocks tend to be volatile. Growth is defined based on fast growth high growth rates for earnings, sales, book value, and cash flow and high valuations high price ratios and low dividend yields.