Why ETF Transparency Matters NOW
Posted on: 03/27/2018
One of the hallmarks of iSectors® Allocations is portfolio transparency. We invite all advisors utilizing or considering our Allocations to study the materials on our website and contact us if you wish to receive more information. One of the reasons iSectors invests in exchange traded funds (ETFs) is the ability to see portfolio holdings on a daily basis.
Christian Magoon of Amplify ETFs has written an excellent article discussing ETF transparency which we have reproduced with his permission below. The views of this post are his and may not completely represent the views of iSectors.
Transparency is an important ETF characteristic during market volatility.
Whenever increased market uncertainty occurs, ETF investors should utilize a feature most ETFs offer: portfolio transparency. The majority of ETFs reveal their exact portfolio holdings on a daily basis via their official website. This real-time portfolio transparency allows investors to better understand and address portfolio specific risks. While important during times of market volatility, portfolio transparency is just as valuable to any investor seeking to diversify and follow a long-term asset allocation plan.
A transparent portfolio provides the foundation on which to build both proper portfolio diversification and asset allocation. Proper diversification helps to reduce the concentration risk of an investment portfolio. When an investor seeks to diversify, it is important to know exactly what is owned inside that portfolio. Constant portfolio transparency allows for more accurate portfolio data and decisions.
In another related effort to address portfolio risk, asset allocation is a method that tailors a portfolio to best fit an investor’s risk tolerance and time horizon. Predictably the more frequent the transparency of the portfolio, the more precise the asset allocation can be.
Accurately implementing and monitoring a portfolio’s asset allocation and diversification is important in all types of market environments. The portfolio transparency of ETFs provides investors with current and complete information to base crucial decisions on.
Should market volatility – or risk – increase in 2018, ETF transparency will only matter more to investors as they seek to understand, position and monitor portfolios in light of marketplace risks.
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