While picking out an outperforming niche sector may be very satisfying, investors should also include broad core exchange traded fund holdings that stand up against changing market conditions.
The most “active” an average ETF investor will get is through regular rebalancing to hit a target asset allocation, writes Mitch Tuchman for Forbes.
Consequently, investors should focus on large and low-cost funds with a lot of liquidity for core allocations. These types of ETFs will provide diversification and are cheap to hold over a longer period of time.
For instance, Tuchman points out several funds that may provide suitable exposure to broad, diversified market indices.
iShares Russell 3000 Index (NYSEArca: IWV) tries to reflect the performance of the Russell 3000 index, which tracks the largest market capitalization-weighted U.S. stocks. The top holdings include Apple 2.5%, Exxon Mobil 2.1% and Microsoft 1.6%. Top sectors include financials 19.1%, tech 15.4% and consumer discretionary 14.7%. IWV has a 0.20% expense ratio.
iShares S&P Small Cap 600 Value Index (NYSEArca: IJS) follows the S&P 600 index with the lowest price-to-book ratios and represents about 50% of the S&P 600 index. Top holdings include Centene 1.0%, Proassurance 1.0% and Emcor Group 0.8%. Top sectors include financials 22.4%, industrials 18.2% and consumer discretionary 14.8%. IJS h as a 0.30% expense ratio. [A Look at Small-Cap ETFs Outclassing the S&P 500]