Many investors focus on buying exchange traded funds (ETFs) as a way of diversifying their portfolios and generating better risk adjusted returns over long periods of time. These funds typically have much lower fees than mutual funds, and are ways for passive investors to get access to cheap diversification. These are all certainly good things, and I would highly recommend investors consider ETFs for this purpose.
That said, there are also equity options that, in many ways, replicate the portfolios of ETFs. These are companies that own various companies across a number of different industries. Some conglomerates such as Berkshire Hathaway Inc. (NYSE:BRK.B) offer investors access to a portfolio of companies built by Warren Buffett, one of the greatest investors of all time. The companies included in this portfolio tend to be lower-risk, large cap investments in defensive sectors.
Defensive investors looking for such exposure would be well-suited to consider Berkshire, or a conglomerate/ETF with similar defensively-oriented investments in this current environment. When stocks become overvalued to the extent they have become in recent months, investors can decide to get out of the market. That said, no one really knows where stocks are headed, and it is conceivable that there is significant upside on the horizon. Investors tend to lose money by being out of the market, so just staying invested and reallocating resources to more defensive groups of companies, such as those held in Berkshire, is a great way to manage risk while generating excellent long-term returns.
Invest Wisely My Friends.
