How to Choose an ETF Portfolio

ETF stands for Exchange-Traded Fund, an investment vehicle that provides a low-cost way to invest. There are many different types of ETFs available to those who want to invest. Choose wisely what you include in your portfolio and your bank account will thank you.

Difficulty: Moderate

Instructions

1. Determine the amount of money you have available to invest before choosing a portfolio.

2. Learn the advantages of an ETF portfolio. The annual fees of ETFs are lower than mutual funds and commissions from brokers are considerably cheaper than with other investments.

3. Understand the different types of ETFs. They range from low- to high-risk investments. Large-cap stocks provide a good amount of security and have larger dividends over time. Small- or mid-cap investments offer little security but have a higher prospect for rapid gains. Emerging stocks provide a chance for economic growth and exposure to other markets. Bonds and commodity stocks have minimal risk. Visit ETF.com to find detailed ETF information. (See Resources below.)

4. Decide on a strategy for your investments. Each investor has different needs and ideas for their portfolio. Choose a portfolio to fit your specific needs. To cover all the different types of ETFs, choose some large-cap investments, some small- to mid-cap investments, bonds, emerging stocks and commodity stocks.

5. Monitor your investments regularly and make changes as required.

Tips & Warnings

• Diversify your portfolio to lower your risk and increase the possibility of growth.

Resources

• Find tips and information about ETFs at the American Stock Exchange.
• Read information and descriptions of different types of ETFs.

[etfwiz]

on 7/28/2008 I think there is a problem with one of the Resources links.

Here are a few resources that we find valuable in comparing mutual funds and ETFs and for researching ETFs:

1. SEC's Finra calculator

Calculates the expenses of a fund over a designated time period. You can compare up to 3 funds or ETFs at a time.

http://apps.finra.org/Investor_Information/EA/1/mfetf.aspx

2. ETF MarketPro

A comprehensive ETF directory and set of tools and resources for ETF investors.

www.etfmarketpro.com/investors/

3. Investment Company Institute

Industry group website that provides that latest statistics and other industry-wide information about ETFs.

http://www.ici.org/index.html