In the third segment of our series on Exchange Traded Funds we will look at the vast array of investment choices among ETFs.

In 2000 there were 94 ETFs. Today there are over 1600 ETFs with over $2 trillion in assets. Due to their popularity the number of ETFs has grown over 20% a year for the last ten years. There are over 45 sponsoring companies that offer ETFs. Some of the major sponsors are Barclays, First Trust, iShares (BlackRock), Schwab, State Street (SPDRs), Vanguard and Wisdom Tree.

Because of the many choices among ETFs, investors can easily diversify their portfolio by:

  • Total Market – ETFs are available tracking the entire domestic equity market.
  • Indexed – track indexes such as the Dow Jones Industrial Average (DJIA), S&P 500, S&P 100, Nasdaq 100, Russell 1000, Russell 2000, US Dollar, 7-10 year US Treasury, 20 year US Treasury.
  • Asset Size – large cap, mid cap, small cap and micro-cap
  • Asset Style – track growth or value coupled with asset size such as large cap growth, large cap value, mid cap growth, mid cap value, etc.
  • Fixed Income – track a wide-range of taxable and tax-free bonds.
  • Asset Style – track domestic and international stocks.basket
  • Country or Region – track the equity markets of specific countries or entire world regions.
  • Emerging Markets – track equities in emerging and frontier markets around the globe.
  • Sectors – track over 125 different economic sectors and sub-sectors such as financials, health care, technology, utilities, energy, internet, social media, etc.
  • Commodity – track different commodity based indexes such as oil and gas, precious metals, agricultural commodities and materials.
  • Specialty – track a wide-range of alternative stocks such as dividend based stocks, real estate, master limited partnerships, managed portfolios, inverse and leveraged ETFs.

Since there are roughly 4,000 public stock companies listed on various exchanges there is an overlap in many of the ETF holdings. For example there are over 100 ETFs that hold Apple Inc. (AAPL) as one of their holdings. Not all ETFs survive. A sponsor may close an ETFs if it does not trade sufficient volume or does not gain a popular following among investors. Suffice to say there are probably too many ETF choices for the average investor. How would an investor choose among 1600 ETFs? In our next segment we will look at different ways to construct a portfolio using ETFs.

Contact us if you would like to discuss your financial goals with a Worth Asset Management Advisor.

Keep in mind that past performance is not indicative of future results. In addition, there may be other Exchange Traded Products that offer exposure to the sectors mentioned and each has their unique perspectives and characteristics. It is important to determine if they are appropriate for your personal portfolio.

Disclosure: Worth Asset Management is a Registered Investment Adviser with the state of Texas. Jim Clark and/or his clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The comments and opinions offered herein are not personalized recommendations to buy, sell or hold securities.

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