Additionally, there are a number of so-called geared, or leverage and inverse, ETFs available. These ETFs promise to generate multiple or opposite returns of a target market. However, these leveraged and inverse are highly volatile, incur high costs and are less tax efficient than traditional ETFs. Furthermore, due to compounding issues, leveraged and inverse ETFs may also deviate from their target strategies over the long-term. The geared ETF strategy is not for the uninitiated. [For the Adventurous, These Leveraged ETFs are Working]
For a simple investment portfolio, investors should consider broad and cheap index-based ETFs. For instance, there are a number of ETFs that track broad market indices, like the S&P 500, or funds that cover the total stock market. Additionally, the cheapest broad sock ETF only has a cheap 0.04% expense ratio.
In the bonds space, fixed-income investors can diversify with both domestic and international bond ETF options. Traders can also break it down further and target corporate bonds, municipal debt or government-issued Treasuries.
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.