It is not ETFs vs. Mutual Funds

These days “ETFs” are being tossed around as an investment strategy.  Please remember they are not an investment strategy!  Each ETF has a specific investment strategy.  You should select based on the investment strategy first and then the right structure to deliver that strategy.  99% of current ETFs are index-based which means if you want them to react to the changing markets, you have to make the change.  So often we read that people are “turning to ETFs”, I think they mean more investors are turning to index-based products.  Soon active ETFs are going to be a much larger component of the ETF market, and it will be critically important to look at the investment strategy.  As mentioned in a prior post, ETFs are a way of accessing an investment strategy.  Mutual funds, separate accounts and hedge funds are also ways of accessing an investment strategy, each with its own benefit.

As a firm, we will enjoy the benefits of the wide spread adoption of ETFs, however we will put an enhanced focus on educating on the investment strategy.  It is important to know what you own.  If you are not doing your homework, find an Advisor.  The market is more risky today than it was 3 years ago, and odds are your risk tolerance has remained the same or moved lower, have you adjusted your risk exposure? do you know how?  If not, call an Advisor who can respond to your needs and to a more dynamic market.


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