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AN IMPORTANT OBJECTIVE for all physicians is to retire with a fully funded retirement plan. How the money in the pension plan is invested is critical in determining the timing and style of retirement. Exchange- traded funds (ETFs) should be considered an alternative to mutual funds and individual stocks in any retirement plan. Similar to mutual funds, ETFs are a collection of stocks or bonds that track a specific market index. An example of an ETF is the iShare Dow Jones U.S. Energy ETF. This fund tries to match the performance of the energy stocks included in the Dow Jones U.S. Oil and Gas Index. Stocks in this fund include Exxon Mobil, Chevron, Occidental Petroleum and Apache. Some of the attributes of ETFs that have caused them to be termed "the modern day mutual funds" and have led to their workhorse status are as follows: + Low cost. Most ETFs have lower expense ratios compared to mutual funds with no upfront sales charge or ongoing costs such a trailers or 12b-1 fees. + Transparency. At any point in time, investors know what stocks are owned by the ETF as opposed to mutual funds, which are only required to disclose what stocks they own twice a year. This transparency can help prevent style drift if funds decide to chase returns. + Diversification. Like mutual funds, ETFs ožer immediate diversification, lowering the overall risk of a portfolio and eliminating the need for investors to be stock pickers. + Tax e•ciency. Although not a concern for retirement plans, ETFs are more tax friendly because they trade like stocks and not like mutual funds. As a result, when an investor wants to sell ETF shares, underlying assets do not have to be sold, thus preventing capital gain distributions to the remaining owners of the fund. ETFs should be considered when reviewing your asset alloca- tion. Like any investment, it is important to focus on quality to minimize risk. Make sure the next discussion you have regarding your retirement plan includes ETFs. Rich Weidrick is a CPA and a Principal of Weidrick Livesay & Company in Akron, Ohio. ■ ETF's Offer Low Cost Balance for Retirement Plans BY RICHARD WEIDRICK, CPA/PFS M D N E W S . C O M /// M D N E W S C L E V E L A N D /A K R O N / C A N T O N n J A N / F E B 2 016 2 7