Exchange traded funds (ETFs) are tailored to fit into any portfolio, and are structured like a stock, but carry the diversity of a mutual fund. But as with anything popular, they have their detractors, who can be a vocal lot.
When it comes to ETFs, everyone’s got an opinion. While some are advocates of these easy-to-use securities, others see them as harmful. The New York Times reports on certain points some investors have brought up that are advantages and disadvantages to using ETFs.
- ETFs allow you to separate from your investments, especially in volatile markets. Emotional attachment isn’t good and has done in many an investor. But it’s harder to get attached to a basket of stocks than an individual company. [How to Begin Using ETFs.]
- Some consider an ETF the hallmark of a manager that has given up on stock picking. But those who understand know that single-stock picking is challenging. If you can’t beat the market, why not buy the market? [ETF Criticisms: Fact or Fear?]
- Some believe that ETFs will save their portfolios in down markets. This isn’t any truer with ETFs than it is with other securities. They’re a good tool when used smartly with a strategy, but they can also cause harm if used incorrectly. There’s no such thing as a magic bullet.
For more stories about ETFs, visit our ETF 101 category.
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.