Chris Cook, president of Beacon Capital Management, also believes investors should start off with broad core positions, but for larger portfolios, investors can stir in sector funds and even real estate exposure.
Specifically, Cook recommends 10 areas that investors can target, including materials, energy, telecom, finance, health care, technology, consumer discretionary, consumer services, industrials, and consumer staples. For broad sector ETF exposure, investors can consider options from State Street Global Advisor’s SPDR suite, Vanguard Group, BlackRock’s iShares and the more recent additions from Fidelity Investments.
“You get exposure to every segment of the market, and they work well together,” Cook said. “If one of these categories takes off, you can manage or track it directly without disturbing the others.”
For example, the Technology Select Sector SPDR (NYSEArca: XLK) and the Consumer Discretionary Select Sector SPDR (NYSEArca: XLY) were among two best performing sector ETFs over October. [The Best Sector ETFs for November]
Hugh Anderson, managing director for HighTower Advisors, also agrees on building a portfolio with a solid group of blue-chip index funds. However, for those itching to play the market, Anderson advises clients to utilize smaller positions in individual stocks. Since ETFs trade like a stock, many would be tempted to trade ETFs more often than a mutual funds, which could erode returns due to commission fees.
For more information on investing in ETFs, visit our ETF 101 category.
Max Chen contributed to this article.