ETF investors have access to a plethora of asset categories, but many may be overweight or underweight in certain areas, which may lead to unintended risks.

In a recent analysis of over 250 investor portfolios, State Street Global Advisors discovered that many investors  have overlooked some important points when it comes to constructing a diversified investment portfolio, leaving unintended risks amidst the ongoing hunt for yield.

For instance, 67% of portfolios had an underweight to developed markets on an absolute basis, reflecting the large home bias many investors have adhered to, despite strong performances in international stocks over the first half of the year. For many years, U.S. markets have outperformed, which has helped feed the home bias, but as the rally grows long in the tooth, investors should be open to new ideas and investment opportunities, such as the relatively cheaply priced international markets.

Investors have also become overweight real estate in the ongoing search for income in a low-yielding environment. SSGA warned that real estate exposure could mask unintentional underweights to financials as the real estate segment was the only sector to have an overweight greater than 1%, which may be attributed to the fact that it has only recently become an independent GICS sector for about a year. Real estate was previously grouped into the broader financial sector.

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