Building a Core Portfolio With ETFs | ETF Trends

As the markets begin to stabilize, many investors are reassessing their portfolios and going back to basics. Exchange traded funds (ETFs) can help build a core portfolio of broadly diversified funds for the long haul.

A few tips, courtesy of both ETF Trends and John Spence for MarketWatch:

  • The so-called plain-vanilla ETFs are the funds that should be remembered when you’re getting started, regardless of your age. After the recent market meltdown, the leveraged and inverse ETFs have been hogging the headlines. Broadly diversified funds have gotten lost in the mess.
  • ETFs sporting rock-bottom fees and tracking wide swaths of the market are better tools for most investors, and can help build a broadly diversified portfolio. For many individual investors, depending on your goals, it may be all you need.
  • A core portfolio will create a diverse mix of asset classes, spreading risk out and slowly building wealth over time. This strong mix will get investors through both a bear and a bull market as well.
  • Investors who want to take a more hands-on approach should have a strategy for getting in and out of positions. Buy-and-hold is a strategy that has burned many investors recently; the time to take charge is now. By creating specific entry and exit points, you give yourself a chance to take a position in time for a potential long-term uptrend, while limiting your losses on the downside.

Among the many broad-based ETFs:

  • SPDR (SPY): up 10.2% year-to-date

  • Vanguard Total Stock Market (VTI): up 12% year-to-date

  • iShares MSCI EAFE Index Fund (EFA): up 12.8% year-to-date

For more stories about ETF investing, visit our ETF 101 category.

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.