Financial experts say that the task of a complete portfolio ETFS could be a practical strategy, but it’s important to know what components are within the funds you might have bought.
When taking a look at the portfolio diversification for ETF-focused investors, Jonathan Rivard, General State order by Edward Jones said it’s important to bear in mind the time horizon and risk appetite of the person.
“You could be invested in ETFs absolutely 100%. But you want to know what the ETF is and what the assignment looks like. Some ETFs will be balanced; you will have a mixture of stocks and bonds. Some will be sector products,” said Rivard. “The most important thing depends on understanding what this basket is holding? And if I have several ETFs, what about several ETFs in relation to asset assignment?”
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Diversification of investment types, not only geography
Prerna Mathews, Vice President of the ETF product strategy of Mackenzie Investments, said that it was some details that need to be taken under consideration by way of diversification, specifically that it’s important to transcend diversification through geography.
“So (if) you with the core Canadian, the USA, the international exposure, not there. Think about how a fixed income plays a role in your portfolio, real assets, there are thematic products, and there are alternative ETFs. There are many different drivers of return that are available in an ETF form,” she said.
Another consideration is the acquisition of ETFs with different investment styles, which could also include the mixture of traditional index ETFs with others that actively manage or have a low volatility.
Time horizon can also be a very important consideration through which those with an extended investment horizon need to focus on growth, she said that they’re more risk with higher equity exposure.
With regard to fixed income, Mathews would pay attention to the differences between short and longer-term yields, and added that the majority investors are probably not exposed to each duration of fixed income and may know the relevant compromises.
