For investors who desire a strategic approach to investing that gives them broad market exposure, the Freedom ETF Account could be appropriate. You get comprehensive, professional guidance along with a systematically constructed asset allocation that's filled with low-cost, tax-efficient exchange-traded funds (ETFs).
Further information on the funds selected for the Freedom Portfolios is available by prospectus, which can be obtained through your financial advisor. Investors should carefully consider the investment objectives, risks, charges and expenses of the Freedom Portfolios before investing. The prospectus contains this and other information about the funds and should be read carefully before investing.
Clients should be aware that exchange traded funds and mutual funds have unique distinguishing characteristics and their cost structures differ, sometimes significantly. A mutual fund is a type of investment company that pools money from many investors and invests the money in stocks, bonds, short-term money-market instruments, or other securities. An ETF is a type of investment company whose investment objective is to achieve the same or similar return as a particular market index. An ETF is similar to an index fund in that it will primarily invest in the securities of companies that are included in a selected market index. An ETF will invest in either all of the securities or a representative sample of the securities included in the index. ETFs may be bought or sold throughout the day in the secondary market, unlike mutual funds which are redeemed through the issuing company at Net Asset Value.
Mutual funds are typically actively managed, and as a result, the underlying management fees and operating expenses assessed by the fund companies are generally higher than those for ETFs (1% to 1.5% for mutual funds versus .20% to .30% for ETFs). Potential investors should understand that the annual advisory fee charged in the Freedom program is in addition to the management fees and operating expenses charged by mutual funds and exchange-traded funds. In addition, mutual funds may impose short-term trading charges (typically 1% to 2% of the original amount invested) which are generally NOT waived for fee-based accounts.