Investors looking to make the complicated uncomplicated have come to the right place. In this article, I’m going to discuss why exchange traded funds (ETFs) are one of the cheapest and easiest ways for investors to do just that. It’s a new year, new you, right?
Exchange traded funds own fully diversified portfolios across entire indices, sectors, geographies, etc. There are now funds that track secular trends like specific technologies or ESG. An ETF exists to provide exposure to nearly every trend out there today.
Capital inflows into ETFs have made these groups of funds one of the fastest growing areas of the market today. This is partly due to the extremely low management expense ratios, or fees, investors pay to have these fully diversified funds put together (many ETFs have MERs as low as 0.1%, some have MERs even lower).
With portfolio construction one of the most difficult pieces of investing (and the most costly), having access to well-diversified funds that track the overall market is a perfect solution for passive investors, or active investors who feel they are spending too much time managing their own money.
Paying a money manager 2% a year or more for gains that may lag the market isn’t really an attractive alternative to building one’s own portfolio, so ETFs fill that gap for those that are somewhat active but are looking for something simpler.
I would thus highly encourage all investors to consider ETFs as an alternative to the madness of yesteryear.
Invest wisely, my friends.
