For any exchange traded fund (ETF) investor, diversification is key. One of the sole reasons people choose to use these funds is to get the instant diversification with one investment, while keeping risk and volatility to a minimum, rather than just buying one stock and hoping.

Matt Krantz for USA Today suggests using certain broad-based ETFs to get the diversification you crave, without the endless research and risk. Such as:

  • SPDR S&P 500 (SPY)
  • Vanguard Large-Cap Value (VTV)

These are starts for a portfolio, and then using these as a core holding, you can add ETFs that hold stocks from areas such as real estate investment trusts and bonds, emerging markets, small-caps, small-value-priced companies, international and small international, and possibly a money market.

Krantz’s suggestions underscore the benefits of ETFs – why buy 10 stocks, when 10 ETFs could give you so much more? When you’re putting together your portfolio, just keep in mind where you’re weighted and know what you own, and always be mindful of your time horizon and risk tolerance.

Putting that thought and effort into your asset allocation could pay off down the road.

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.

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