In finance, few solutions if any at all apply to all types of investors. Each investor has its own risk and return requirements, its own views on the markets, etc. Thus, I would not say that every single investor should build an ETF portfolio. That being said, building an ETF portfolio gives investors so much flexibility that I think there are only 3 reasons why this website/alternative would not fit your needs:
–You have too little money: Investors that have less than $25,000 or so and do not anticipate getting over that level in the next few years should probably not go for an ETF portfolio. Why? The trading fees alone will make this alternative more costly than using other methods such as buying mutual funds.
–You have too much money: Investors that are putting tens of millions of dollars into the markets can generally track indexes with less costs. That is only true for institutional investors and high net worth individuals.
–Investors that do not have the time or interest to take care of their own investment portfolio.
There is nothing I can say about the first 2 reasons. If you are not able to reach $25,000 of savings in the next few years, you should really be spending more time on one of our main blogs, TheFinancialBlogger, which will help you to increase your earnings and get out of the rat race . As for those managing tens of millions of dollars, I don’t think you will start managing your funds overnight. However, some of the content on here will help you better understand how your current portfolio managers are or could be managing your money.
As For The Others
Too often, I hear about investors, generally ones that work outside of finance. They don’t want to get involved in their finances because they have too little interest or they don’t have enough time. Good try but those are poor excuses. There is no good reason to not be involved to some extent in your portfolio. There are so many reasons why you need to know but I think they all more or less come down to:
It Does Not Take As Much Time As You Think
To many, managing a portfolio seems like a complex task. I would argue that many think the same thing about filing taxes every year. Yet, millions end up doing it and realize that it is much simpler than they believed. There are steps to follow and you can get by spending only an hour or two every month. Of course, more active investors could easily spend all day as well. I think the financial industry has not helped in simplifying the process. Why? They end up making a lot more money if they can manage everything for you. That will generally result in over-complex strategies that add up fees. It’s also important to understand that you will enjoy much more flexibility knowing what you own and how it is evolving. This will also tend to encourage you to save more, which can only be good in the end.
You Need To Know What Is Going On In Your Finances
The issue of fees is a big one. You might think that 1% or 2% is insignificant but we had posted an interesting spreadsheet on Experiglot showing the huge impact of a 1% fee. Believe me, through different lays, you can easily end up paying 2% or more of fees that you could avoid by managing things yourself. Over time, that translates into hundreds of thousands and can have a dramatic impact on the quality of life during your retirement. Getting a better idea of how your portfolio is built, how much risk is involved and other characteristics is also very important.
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