While exchange-traded funds (ETFs) are associated in the popular mind primarily with equities, in recent years virtually every asset class has been represented among the multiple new product releases.
In light of the current turbulence in financial markets and the threat to the values of many stocks, advisors and their clients are building portfolios that also include ETFs focused on fixed-income, real estate or REITs, commodities, precious metals and other asset classes not highly correlated with equities.
As he notes in a video interview posted at
www.financialpost.com, Barclays Global Investors Canada president and CEO Rajiv Silgardo says many advisors are embracing its broad iShares CDN Bond Index Fund [XBB/TSX] and its iShares CDN Real Return Bond Index Fund [XRB/TSX].
The former has a Management Expense Ratio (MER) of 0.3% and includes a broad cross-section of Canadian government and corporate bonds. The Real Return Bond fund provides inflation protection at an MER of 0.35%: either fee is far more cost-effective than the average bond mutual fund MER of 1.4% in this country.
Silgardo is confident an all-ETF portfolio diversified across multiple asset classes could withstand the kind of volatility we've experienced so far in 2008. "My view is investors have to stay focused on the longer term. They can take advantage of short term tactical opportunities with part of their portfolio but the bulk, the core of their portfolio, has to be positioned in line with their Investment Policy Statements, which comes off the Strategic Asset Allocation investors do."
Advisors need to know how to build portfolios that will give clients the return they need over the long term. "They can do it with all ETFs and be confident with the markets' ups and downs that their portfolios will serve them well. ETFs will give them the diversification they need, the transparency and it all comes at a lower cost."
Facebook
Twitter