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| AznHisoka |
 Posted: Thu Dec 15, 2005 5:06 pm Post subject: Is it sensible to put all your money into just 1 ETF? |
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Investing Associate
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| Since most ETFs, by nature are already diverse and low risk, is it okay to invest 15K on just one ETF, rather than spread it all among on 5-10 different ETF's? It seems having 5 different ETFs is overdiversification and will only dilute your returns. Anyone agree? |
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| Im Not Warren Buffett |
| Posted: Thu Dec 15, 2005 5:39 pm Post subject: |
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CFO
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Not all ETFs are diverse, the broader market tracking indices are, but many ETFs focus on a specific sector or region, which means they are not usually enough diversification by themself. A biotech ETF, such as IBB, or a regional fund, such as TRF (Russia/East. Europe) does not insulate you very well from volatility. I use those two funds as an example because both have the potential for large gains, but both also carry above average risk. A total market index, such as TMW, seeks to track the performance of the Dow Jones (in this case), S&P, Russell 2000 (for small-caps), and provides more of an economic cushion because your index holdings are spread out. If you say what ETFs you are considering, I could look at them and give you an idea of how much diversification they give you.
And remember, the same diversification which "dilutes your returns" also "dilutes your losses". Going into only one or two funds is a higher risk strategy, but it all depends on how much confidence you have and how much money you can afford to lose.
www.etfconnect.com is a good place to start. |
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| Dave Rathbun |
| Posted: Fri Dec 16, 2005 3:31 am Post subject: |
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CFO
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In my opinion, it comes down to hitting "singles" rather than home runs. Home runs are a lot more exciting  but a lot of singles are just as effective at winning the game and a lot easier to obtain.
Diversification is a way to try to hit a lot of singles in the game. Holding a single asset (whether a stock, fund, or ETF) is like trying to hit a home run. If you make it, you're really excited. If you don't...  |
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| barloy |
| Posted: Tue Dec 20, 2005 6:17 am Post subject: e |
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Investing Sr. Associate
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| yes that what i was thinking but what do i know |
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| remotivator |
| Posted: Tue Jan 10, 2006 10:08 am Post subject: |
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Investing Sr. Associate
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| Is there any stereotypical average amount of time which ETFs are held before you've gotten all you can out of their runs? I mean, like typically shorter periods of time than mutual funds? I was noticing alot of the mutual funds tend to yield the most in 3 to 5 yr periods, then they seem to slack down at their 10 yr mark. Any track record patterns like this that are common for ETFs? |
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| Dave Rathbun |
| Posted: Tue Jan 10, 2006 10:18 am Post subject: |
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CFO
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| Mutual funds are subject to the whims of their manager(s). ETF's are defined by the underlying stocks. If your ETF includes cyclical stocks then the ETF will be cycical as well. |
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