How Many ETF’s Does One Need To Retire? Less And Less

By: Pete
Date posted: 04.13.2012 (5:00 am) | Write a Comment  (0 Comments)

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It’s fascinating how quickly the investment world is changing thanks to ETF’s. Even a decade ago, someone trying to manage his own retirement would be stuck trying to buy stocks that would be as diversified as possible. Buying bonds was certainly possible but turned out to be extremely expensive and difficult to trade. There was always the possibility of using mutual funds which is the road most chose but that was an expensive solution.

ETF’s To The Rescue

A decade later, an American investor is now able to get a fully diversified portfolio with just a few different ETF’s. Some choose the even easier road of buying Target Date funds but I generally think it’s more efficient to build your own target date fund. Why? You really only need a few ETF’s to get it done. I’ve already written about a few sample ETF portfolios but a few new ETF’s have made our lives even easier.

A New WisdomTree ETF

A few months ago, I was thrilled to see that WisdomTree had launched an ETF that tracks Emerging Markets Local Debt (ELD), which buys Sovereign debt from emerging markets. That was clearly a great sign. Then, earlier this year, WisdomTree launched EMCB, an emerging markets corporate bond fund. Clearly, it is becoming easier to own an extremely well diversified fund. In reality, one could probably build an ETF portfolio that would own:

Stocks:

-US Equity ETF (VTI for example)
-EAFE Equities (EFA for example)
-Emerging Markets Stocks (VWO for example)

Bonds:

-Total US Investment Grade market (Pimco total return ETF BOND for example)
-International corporate bond fund (IBND)
-Emerging market corporate bond fund (EMCB)
-Emerging market sovereign debt (ELD)

Anything Missing?

Honestly, there isn’t much missing at this point. I think that eventually we will be able to get a solid Global Bond fund or at least an international one that will include exposure to both corporate and government bonds. It is a challenge for ETF issuers to build such a fund as they continue to open new ETF’s, they are getting closer to that day in my opinion. Clearly, I think DIY (do it yourself) investors that want a passive strategy will be better served by ETF’s that any other product at any point in the past, that is great news and it should be celebrated!


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