What is an exchange traded fund?
Wikipedia describes an Exchange Traded Fund (ETF) as an investment fund that trades on U.S. exchanges just like a stock. Many ETFs track stock (S&P500) and bond indexes (Barclay’s Aggregate Bond Index).
Why are ETFs so Popular?
Trillions of dollars are invested in ETFs due to their low costs, tax efficiency, high diversification, and stock-like features. A high percentage of these assets are in 401k retirement plans.
What are Typical ETF Investments?
An ETF can hold any type of investment that has a ticker symbol – for example, stocks, bonds, REITs, and commodities.
What About Net Asset Value?
ETFs generally operate with an arbitrage mechanism that is designed to keep them trading close to their net asset value.
How Are ETFs Different Than Mutual Funds?
ETFs share the word “Fund” with mutual funds.
You select mutual funds based on their stated investment strategies – for example, a fund invests in mid-capitalization U.S. stocks. You invest in the fund if you want part of your assets invested in that asset class.
You also select ETFs based on their stated investment strategy, but they do not pool assets for investment. Therefore, it is much easier to tailor a portfolio of ETFs for individual investor needs.
Are ETFs Index Funds?
ETFs may duplicate the investment of an index fund or a particular asset class – for example, an ETF may duplicate the S&P500 or invest in large capitalization U.S. companies. In general, ETFs are not recognized as index funds.
How are ETFs Associated with Target Date Funds?
A typical Target Date Fund invest assets in several Exchange Traded Funds. This is a low cost way to provide a well-diversified portfolio that may contain thousands of securities.
What About Diversification?
Let’s say you want to invest your assets in a global portfolio of stocks.
Instead of buying a few stocks in each country, you would buy an ETF for each country that is invested in hundreds of company stocks.
What are ETFs Biggest Advantages?
ETFs provide the performance of an asset class for lower risk and expense.
They are an efficient way to build a diversified portfolio of different asset classes.
How Does GlidePath Wealth Management Invest Assets?
100% of your assets are invested in 8-10 Exchange Traded Funds.
Each ETF invests in a different asset class including stocks, bonds, real estate, and commodities.
We manage domestic and global portfolios of ETFs.
We do not pool assets for investment. Each GlidePath client has his or her own portfolio of ETFs that we tailor for their specific needs: Target dates, return objectives, and tolerances for risk.