Financial Advisor & RIA Center
RIAs and financial planners have unique challenges and opportunities in regards to ETF investing. ETFdb's Financial Advisor and RIA Center is geared towards financial advisors who use ETFs in client portfolios.
In the early days of the ETF industry, the vast majority of funds tracked well-known equity benchmarks, such as the S&P 500, Russell 1000, and Dow Jones Industrial Average. As the benefits of ETFs have become more widely known and understood, the number of issuers and ETFs has increased significantly, and so has the scope of asset class exposure available through ETFs.
A 2010 article penned by Andrew Bogan, managing member of a Boston-based asset management firm, briefly caused a surge in anxiety among ETF investors, spreading concerns about the stability of the ETF structure. Bogan’s “research” attempted to delve into one of the less-mentioned differentiating attributes of exchange-traded funds: the ability to sell these securities short, and the potential ramifications of massive short selling of an ETF. The conclusions he reached painted a rather frightening picture for any investors or advisors who use ETFs.
When categorizing various investment vehicles, most investors tend to think of mutual funds and exchange-traded funds (ETFs) as polar opposites. Mutual funds are associated with active management, with a team of analysts and managers seeking to generate alpha by identifying undervalued securities from a relevant universe of stocks and bonds. ETFs, on the other hand, connote a passive investment strategy, products that seek to replicate the performance of a certain benchmark instead of seeking to beat it. For those who believe that active management (or at least certain active managers) add value, mutual funds may be preferred. For those who believe that it is impossible to consistently outperform markets, the lower-expense beta offered by ETFs are more attractive [see 5 Charts to Put Mutual Fund Expenses in Perspective].
In the world of finance, with innovation comes complexity, and ETFs are no exception to this rule even in light of their unparalleled ease-of-use and cost-efficiency. Given the sheer variety of options available, it’s no wonder that ETFs have found their way into countless portfolios and onto traders’ radar screens. While simplicity has proven to be at the heart of the exchange-traded product structure, there are still a number of nuances that must be taken into consideration before jumping into a position that are often overlooked, even by experienced investors [see also 101 ETF Lessons Every Financial Advisor Should Learn].
As the exchange-traded world continues to expand, many investors find themselves asking the same questions about how these products work. Of course, not everyone is as vocal about their curiosities, leaving a number of unanswered questions in the space. In an ongoing effort to keep you educated about the ETF world, we mapped out ten questions you may have been too afraid to ask [see also How To Pick The Right ETF Every Time].
Exchange-traded funds (ETFs) have burst on to the scene in the late 2000s and early 2010s, raking in hundreds of billions of dollars in assets and prompting a major shift towards indexing strategies in the process. ETFs have empowered financial advisors (FAs), registered investment advisors (RIAs), Chief Financial Officers (CFOs), money managers, and retail investors to take greater control over their portfolios, pushing down fees and maxing out tax efficiency in the process. While ETFs appear quite simple on the surface, these securities can be quite complex. In order to get the most out of ETFs, there’s a lot that investors need to know about the structure, opportunities, and limitations of these securities.
The rapid expansion of the ETF industry has been one of the most important developments of the last several decades to financial professionals; as the lineup of exchange-traded products has surged past 1,600, financial advisors now have more tools in their toolkits than ever before to help construct client portfolios. With these new financial products comes a responsibility to understand the various risk factors and nuances of exchange-traded products, and as the industry has expanded rapidly the amount of information to digest has swelled as well. While ETF education must be an ongoing process, there are a number of basics that can enhance overall understanding, identify opportunities and limitations, and generally promote a better experience with ETFs [see Free Report: How To Pick The Right ETF Every Time]:
In another article, we highlighted several often-overlooked nuances of popular exchange-traded products, detailing the surprisingly large impact that seemingly minor distinctions can have on a portfolio’s risk/return profile. From the weighting methodology employed by the underlying index to the choice between large caps and small caps for international equity exposure, many details that are often the subject of little consideration can play a big role in determining how an ETF portfolio performs. Below, we highlight five more easy-to-overlook nuances of ETF investing that are often felt in the bottom line [for more ETF insights, sign up for our free ETF newsletter]:
When constructing a portfolio, most investors focus on the decisions that seem to have the most significant impact on the risk/return profile delivered. How much should be allocated to stocks vs. bonds? What breakdown between developed and emerging markets is desired? What sectors should be overweight, and which should be avoided?
These decisions obviously go a long way towards determining the bottom line returns delivered by a portfolio. But for investors who have embraced ETFs as a means of achieving exposure, there are a number of seemingly minor factors that can have a surprisingly large impact on their financial health. Below, we highlight five of these easy-to-overlook considerations that can add up to big differences in return [for more ETF insights, sign up for our free ETF newsletter]:
So you’ve decided you want to invest in ETFs due to their many advantages. But now come the questions: Which ETFs should you invest in? How many do you need to invest in to reap the benefits of diversification? How often do I need to buy/sell ETFs? Don’t worry; we’ve got you covered.