NEW YORK (MainStreet) — The rise in the number of exchange-traded funds (ETFs) being launched are giving investors more options to diversify their retirement portfolios.
Many investors are purchasing ETFs, because they tend to have lower, transparent expenses and are tax efficient, said Kevin Kelly, chief investment officer of Recon Capital Partners, a Greenwich, Conn. registered investment advisory. Today, the company launched its new ETF, the FTSE 100 ETF, the only U.S.-listed ETF benchmarked to the FTSE 100. The ETF, listed on the Nasdaq, gives investors exposure to the FTSE 100, an index which consists of the 100 companies with the highest market capitalization listed on the London Stock Exchange, including Barclays, GlaxoSmithKline, HSBC, Burberry and Rolls-Royce.
ETFs can also help investors diversify their portfolios easily, since buying different asset classes is simple, Kelly said.“You can own gold, real estate or emerging market debt all in one click,” he said.
The rise in the popularity of ETFs are occurrin,g because investors are drawn to their lower fees and portability.
Although ETFs have been around since 1993, their attractiveness has soared in the past few years as more 401(k) and IRA plans are offering them as an option. A decade ago, the total amount of funds in ETFs totaled $200 billion, and investors could only chose from a few dozen options, said Wayne Connors, a managing partner of Retirement Investor, a Glastonbury, Conn. company which allows investors to build their own IRA portfolios.
ETFs are an “advantageous way” to invest for retirement, since the fees are much lower than traditional mutual funds and trade like a stock by tracking an index, such as a commodity or a group of assets, he said. Assets in ETFs now exceed $1.7 trillion and there are over 1,500 ETFs for investors to choose from.
The Tuttle Tactical Management U.S. Core (Symbol: TUTT), which was launched on February 24, is a “fully tactical ETF of ETFs and is the largest of its kind,” said Matthew Tuttle, CEO of Tuttle Tactical Management in Stamford, Conn. This ETF operates under the premise that markets exist in one of four states – times when it makes sense to be completely out of the market, when it makes sense to be partially invested, when it makes sense to be fully invested and when it makes sense to “back up the truck,” he said.“TUTT allows investors the possibility of being able to ride the market up during a bull market without having to ride it down during a bear market,” Tuttle said.
Invest In Sectors to Diversify
Similar to investing in mutual funds, investors can dip a toe into a sector by purchasing an ETF comprised of companies in that industry with less risk than buying individual stocks.
ETFs are popular for many reasons, but many Main Street investors like them as a tool for rebalancing their 401(k)s and IRAs, said Charles Sizemore, chief investment officer at Sizemore Capital in Dallas and a portfolio manager on Covestor, the online investing marketplace.
–Written by Ellen Chang for MainStreet