It’s fun to bet on niche areas markets and win big, but when constructing a long-term investment portfolio, investors are better off sticking to simple and broad exchange traded funds.
Financial advisors typically recommend crafting an investment portfolio with broad-based index funds to capture a wide and balanced range of stocks at a minimal expense, writes Joanne Cleaver for U.S. News.
For example, David Schneider, president of Schneider Wealth Management and a certified financial planner, advises clients to add broad market exposure, including international stock funds, bond ETFs, small-cap stocks and even real estate investment trusts for added diversification. [Low-Cost, Dividend Stock ETFs for a Successful Retirement Portfolio]
Additionally, investors can track cheap U.S. stock ETFs with something like the iShares Core U.S. Growth ETF (NYSEArca: IUSG), which has a 0.09% expense ratio, or more targeted exposure to small-cap stocks with the Vanguard Small Cap ETF (NYSEArca: VB), which has a 0.09% expense ratio. [Build a Dirt-Cheap Portfolio With These ETFs]
Schneider, though, warns investors to stay away from the latest trends or chase after hot money.
“Just because someone has created a product doesn’t mean you should buy it,” Schneider said in the article. “Playing commodity and currency markets or shorting the stock or bond market through an ETF isn’t investing. It’s gambling.”
Schneider also advises investors to stick to the traditional portfolio allocation with a 65% stock and 35% bond position, and the ratio can change depending on age and risk tolerance.