The Diversification of Mutual Funds
Exchange traded funds (ETFs) are a diversified portfolio, or basket of individual securities similar to mutual funds. There are ETFs that hold portfolios of nearly every major asset class, including major stock and bond sector indexes, industries, foreign countries, currencies, precious metals, real estate, and many others. Thus, with the purchase of one ETF, an investor obtains a diversified portfolio of securities in the particular asset class the ETF has been designed to track.
However, ETFs do have several advantages over mutual funds because of their unique structure. For example, they are bought and sold on stock exchanges (just like individual stocks) at any time throughout the day. The unique structure of ETFs may also offer the following advantages over mutual funds:
- lower expense ratios
- lower tax liabilities
- increased transparency
iSectors offers investors complete, properly allocated and diversified, ETF-based portfolios. All iSectors investment portfolios use ETFs as the primary vehicle with which to execute the desired asset allocation strategy.