Exchange Traded Funds are a simple and low-cost mechanism for providing a huge range of diversified investment options across all asset classes.
Each ETF is a collective fund that trades like an equity and tracks a defined index, for example an S&P 500 ETF would track the S&P 500 Index.
The main advantage of using ETFs is that they are a very low-cost investment.
The typical annual cost of 0.2% to 0.4% compares very favorably with the blended average of 1%-2% for traditional actively managed funds.
In addition, ETFs do not levy any upfront charge, whereas traditional mutual funds typically take a 3%-5% upfront charge.
With ETFs, building a portfolio for any asset allocation strategy is easy. It is even possible to buy an ETF that is already diversified across different asset classes.
An investor can take a passive approach to asset allocation by rebalancing the portfolio only to ensure it returns back to the long-term or strategic asset mix.
Alternatively, the investor can take an active role in asset allocation, by tactically rebalancing the portfolio, overweighting those asset classes that are expected to outperform in the shorter term and underweighting the others.
There are many thousands of ETFs available, allowing investors to assemble a low-cost portfolio that exactly matches their risk profile and objectives, spread across all asset classes, geographies and investment styles.
An investor might want to quickly gain exposure to specific sectors, styles or asset classes without having to obtain the prerequisite expertise in these areas.
The implementation of an ETF strategy into your portfolio can offer enormous opportunities as well as more diversification. By deciding to work with Moneo clients receive up to date knowledge and our expertise and experience on the ETF markets.