Conducting Effective ETF Research
In a post last week we began the conversation about Exchange Traded Funds (ETFs) and described some of their general characteristics and differentiating features from mutual funds. ETFs can be an important part of your investment portfolio. Since they trade like common stocks they are as easy to buy and sell as any other stock – through your broker or online trading system or however you manage your investments. They don’t come with multiple share classes or layers of fees and expenses like mutual funds – and because they are passively managed vehicles the management fee component tends to be lower than that of mutual funds. Finally, because ETFs offer you direct access to numerous investment styles, industry sectors, asset classes and geographic locations, they are very useful as an asset allocation tool in constructing risk-efficient, diversified portfolios. We will be talking more about asset allocation in forthcoming blog posts. The purpose of this discussion is to set a foundation for conducting effective ETF research and understanding the risks, returns and trade-offs from alternative ETF strategies.