As investors add more exchange traded funds, it is important to look under the hood and consider sector and company exposures to properly maintain a well-diversified investment portfolio.
Investors are showing more interest in international equities, notably the relatively cheap emerging markets, but investors should first consider what they are getting themselves into.
“It’s important for investors to consider the inherent concentration risks that may be embedded in their equity portfolios – including their emerging markets allocation,” Michael J. LaBella, Portfolio Manager for QS Investor, an affiliate of Legg Mason, said in a research note.
Financial advisors can also learn more about Legg Mason’s insights at the upcoming virtual conference. On March 14, 2018, ETF Trends will be hosting its annual Virtual Summit, an online virtual conference environment where financial advisors can learn about current ETF issues, hear from industry experts and connect with peers without the burden of cost and traveling.
LaBella pointed out that nearly 60% of the benchmark market capitalization-weighted MSCI Emerging Markets Index is focused on China, South Korea and Taiwan, with over 50% of the portfolio leaning toward cyclical growth sectors information technology and financials.
“It is important for investors to consider the inherent concentration risks that may be embedded in their equity portfolios,” LaBella said.