Exchange Traded Funds (ETFs) help you diversify
with low costs

ETFs are an innovative, very low cost form of mutual funds. Their use has grown substantially in the last few years because they are one of the most efficient ways to be diversified across the stock and bond markets, and other asset classes. They remove the burden of picking individual stocks to buy to invest for growth. Most ETFs are indexed funds.

How ETFs work.

An ETF contains a basket of stocks (or bonds, or even commodities or currencies) that track an index of the market. ETFs are bought and sold on the exchanges throughout the day just like stocks. By owning an ETF, you get the wide diversification of an index (such as the S&P 500), but with much lower internal expenses than most regular mutual funds.

ETFs can help you reduce risk by spreading it over many asset classes.

The majority of investors are poorly diversified. Even if they own four or five mutual funds, they are often concentrated in sectors with similar risk characteristics. Because of the variety of ETFs representing various parts of the stock market (mid cap, international, etc.), the bond market (government, municipal, inflation-indexed, etc.), commodities (energy, agricultural, etc.) and currencies, they make great building blocks for a complete, well-diversified portfolio.

ETF costs are very low.

One of the key ingredients to investing is keeping your costs low. The less you pay out in fees, the more you keep - and the more your hard earned money grows. ETFs have a big cost advantage. For example, the average internal expenses of ETFs that invest in U.S. stocks are about 0.5%. By comparison, regular actively-managed mutual funds that buy U.S. stocks have expense ratios, on average, of about 1.6%.* And this doesn’t even include the commissions (or 12b-1 expenses) you might pay to buy those mutual funds from large financial companies.

ETFs are tax efficient.

Have you ever had to pay taxes on capital gains passed through to you from a mutual fund that you held and didn’t sell during the year? Mutual funds are required to transfer realized capital gains on to you as a shareholder - even if you are a long term holder who doesn’t sell. ETFs, on the other hand, have very little internal turnover, and thus distribute very little (or no) capital gains that you have to pay taxes on.

How we use ETFs to help you.

The first thing we will do when we design your investment portfolio is recommend the percentages we believe you should have in stocks, bonds, cash, and any other asset classes. We will then use ETFs as building blocks to build the portion of your portfolio that is invested in stocks. For the portion in bonds, we will typically use a combination of bond ETFs, CDs, and high quality individual bonds. If you transfer in accounts that are already invested, we will work with you to develop a transition plan to achieve greater diversification over time.

We welcome your inquiry, and promise not to pressure you if you ask for more information.  Choosing an investment advisor is a big decision.  We respect your right to explore what would be best for you. Contact Us >>