The ETF or Exchange Traded Fund sector is massively growing since its conception in early 2000s and the number of ETFs is consistently increasing every year. After the emergence of this investment vehicle most of the investors are reaping several benefits because it is the new low-cost investment opportunity that is made available to nearly every investors.
The prime difference between ETFs and mutual funds is the costs and transparency. Managing fee of ETFs is much lower compared to the mutual funds. There are several benefits associated with ETFs due to which most of the investors are now looking forward to build their ETF portfolios.
According to the renowned financial advisor Harry Browne, the first step to build all portfolios is to ensure that all asset classes are included to create diversification. The first and foremost area should be sector ETFs that focuses on specific area, like healthcare or financials. Investors are required to choose up to three specific sectors, but all should be different each other.
The second area must be international ETFs that cover almost all the regions from developed markets to emerging marketplaces. Dan Carlson suggests that ETF portfolio must track the index that invests single country or it could invest in entire region. Moreover, he suggests that it is crucial for the investors to look at the makeup of each ETF portfolio as far as individual sector and stocks are concerned.
Commodity ETFs are the third area of concern. This sector plays a very crucial role in investor’s portfolios. Everything right from corn to cotton and gold can be tracked under this portfolio. Veteran investors who have vast experience in this field may choose ETFs that allow them to track individual commodities. Individual commodities can be volatile at times and it may not fit the investor’s risk tolerance.
Another sector that has become popular amongst the investors these days is forex market. It is also called current ETFs and investors are allowed to make profit from moves in currencies.
The last sector is niche ETFs. Under this category the investors can include ETFs that don’t fall into any other categories. Some of the ETFs that can be included are Chinese consumer stocks, lithium stocks, stocks with strong technical indicators and much more.
No comments:
Post a Comment