Exchange traded funds (ETFs) are a highly-valuable tool for investors. They offer many different benefits and have the potential to help meet an individual’s financial goals. In this blog, we’ll discuss ETFs.
What are ETFs?
Exchange traded funds are collections of securities, such as stocks and bonds, pooled together into a single entity. These funds are traded on major stock exchanges, much like individual stocks.
These collections of securities can include investments across various industries, or be confined to one particular sector.
Often, ETFs are used to track a particular index. For example, an ETF might contain all 500 stocks from the S&P 500 with the goal of tracking the overall performance of the S&P 500.
4 Common Types of ETFs
As the name implies, bond ETFs are comprised exclusively of bonds. Bond ETFs offer many of the same features as individual bonds, such as regular coupon payments. Since a given bond ETF is made up of bonds with different maturity dates, coupon payments could be due at any given time.
Industry ETFs are made up of securities from a particular industry or sector. They empower people to invest in entire industries, such as banking, technology or oil/gas.
In addition, industry ETFs might be used to track the general performance of a specific industry or sector.
Commodity ETFs allow people to invest in certain commodities, such as precious metals or natural resources like oil and gas. When someone purchases a commodity ETF, they typically don’t actually own the physical commodity, but a set of contracts backed by the commodity itself.
Currency ETFs are designed to track the relative value of a currency against the U.S. dollar or a basket of currencies. Trading currency ETFs is essentially speculative trading on foreign exchange markets.
Why Consider Investing in ETFs?
Exchange traded funds are great for providing diversification in an investment portfolio. They can contain numerous types of investments across a wide range of sectors and include a considerable variety of volatility.
Portfolio Management Services by La Ferla Group
Although there is potential to diversify a portfolio and achieve financial goals using ETFs, all of the options make it difficult for individual investors to succeed on their own.
La Ferla Group offers several different portfolio management investment advisory strategies, one of which is the Diversified ETF Portfolio Strategy.
This is an All-Cap Core global equity ETF strategy that is managed to aggressive risk and represents higher volatility than the broader global equity markets.
Its objective is to outperform the MSCI World Index (Net) (World) over 10-year rolling periods and since inception after trading costs, expenses and the advisory fee.