"Sector" exchange traded funds (ETFs), the ones that are narrowly focused, have seen steady outflows recently. After the past two months of market volatility, the true stress test has begun for these relatively new ETFs, reports Ian Salisbury for The Wall Street Journal. While some sectors are holding their own – energy and technology, it’s no surprise sectors such as real estate and homebuilding have suffered. It’s important to remember the thinly focused ETFs can experience more volatility than the broad based ones. Also, these ETFs offer exposure to a sector without having to choose an individual stock to represent the entire sector. While these ETFs may not be for everyone’s portfolio, they are an investment tool. As with any tool, an investor must know the risks involved before using it.
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.