Despite the naysayers that abound, many still feel that exchange traded funds (ETFs) and retirement portfolios go together as well as chocolate and peanut butter.
Since ETFs are cost-efficient and easy to use, many investors are taking to using these in their portfolios. It’s led to a push to get ETFs as a staple in retirement plans, but the industry has hit hurdles along the way. Those hurdles could be crumbling, though.
This is a particularly good time to invest in ETFs because major fund managers and vendors are battling one another to win customers by lowering costs, says John F. Wasik for The New York Times. This commission war is what can help push the industry into the retirement portfolio once and for all. [5 Things to Consider With ETFs and Retirement.]
Here are some supporting points:
- If all you did was replicate your entire portfolio with ETFs, you’d save 1% annually on expenses. Most ETFs are bought and sold through brokers, and, as with other investments, deep discounters typically charge the lowest commissions.
- Three of the largest sellers of ETFs – Fidelity, Schwab and Vanguard – offer commission-free ETFs on select groups of in-house funds. Fidelity also provides a break on some iShares funds.
- It is also prudent to consider which risks you want to insulate your retirement portfolio from: market downturns, inflation, currency fluctuation and losing out on opportunities abroad.
- A fully diversified retirement strategy would include emerging markets, REITs, commodities and possibly currencies, all of which are accessible through ETFs. [ETFs in 401(k) Plans: What It’s All About.]
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.