Financial planning is a personal matter, so when it comes to investing in exchange traded funds (ETFs), can an age-appropriate portfolio make a difference? Diversification and balance are two portfolio principles that David Bogoslaw for Business Week recommends for any portfolio. Below are a few other points to consider:

1. Know What You Own
   First determine how much exposure to equities you are comfortable with and how much risk you’re willing to take. Depending on those factors, consider including emerging markets, small-cap, and international, commodities and real-estate ETFs. One example is to start with the iShares Russell 3000 (IWV), which tracks the Russell 3000 Index that is representative of the 3,000 largest U.S. companies by market capitalization, and build on from there. No matter what method you choose to build a portfolio, avoid overlapping sectors or regions.
2. How Conservative Should You Be?
   Your own retirement time frame will dominate where you allocate your assets. Where investors put their money varies greatly for ages 45 through 55 because some might want to retire in 10 years, others 20.
3. Riding out the Waves
   For those investors with time on their side, emphasis should be on maxing returns with a portfolio geared toward equities. Stomaching market corrections and keeping emotions aside with an investment strategy is the best way to do this.
4. Life-cycle Funds
   These take the guess work out for individual investors by progressively changing asset allocations as investors approach retirement. Although research has shown there is more equity than fixed-income among these plans, they take the emotion out and adjust accordingly for the needed formula of the individual.

Tags: Retirement, Sector ETFs