As the exchange traded fund industry craft more specialized offerings, investors shouldn’t forget that the funds provide broad market exposure, such as equity market segments and asset classes.
“The most important determination you can make is not necessarily which securities you want to buy or you want to hold,” David Armstrong, Portfolio Manager with Good Harbor Financial, said in an interview. “More importantly, do you even want to hold equity risk in a portfolio.”
Once an investor has a general idea of where to begin. He or she can begin including core portfolio holdings. For instance, Armstrong points out that ETFs are a good way to gain access to broad market indices.
“[We] use ETFs to buy index-based exposure and use that in such a way that we’re getting a broad allocation to the markets,” Armstrong added.