Explanation of ETF Risks

Update : Oct. 29, 2012


ETF Investment Risk

ETF investment risk may generally be divided between (1) Underlying Investment Price Movement Risk, (2) Credit Risk, and (3) Other Risks. For (2), caution is required depending on the issue. When investing, please pay adequate attention to these risks.

(1) Price Movement Risk

Movement of Stock Price Index, etc.

There is a possibility the price of the stock price index, etc. may drop due to a variety of economic factors. Due to this, it is possible that an ETF's price will drop and dividends will be reduced. . (However, risk is diversified when compared to individual stock investment.)

Disparity between Stock Price Index, etc., Base Value, and Market Price

ETFs are managed by the asset management company so that price movements for the base value (net assets per unit) are the same as the movements of the underlying stock price index, etc. Because costs related to the underlying securities are incurred when conducting such management, the price movements of the stock price index, etc. and the base value may not be the same.

Additionally, though ETF trading is conducted with reference to the level of the stock price index, etc. and base value, investors should take caution when trading because the market price is affected by supply and demand and price movements of the base value, etc. and market price may not be the same.

(2) Credit Risk

Some ETFs invest in linked-bonds and OTC derivatives. Such ETFs also involve credit risk.

For details, please refer to the following pages:

(3) Other Risks

There may be difficulties in tracking the stock price index, etc. when the market experiences sudden shifts.
An ETF may be delisted if it falls under the delisting criteria specified by TSE..
In cases where the management company deems continuation of the trust difficult, the trust may be concluded.

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