Stock and mutual fund investors may also look to ETFs to create a "core/satellite" portfolio that includes different investment products. Investors using mutual funds may look to ETFs to gain lower-cost exposure to specific geographic areas, sectors or strategies.
Adding ETFs to a core mutual fund portfolio will also create an active/passive strategy, with the mutual funds' portfolio manager's hopefully adding value through their day-to-day active management and the ETFs providing low-cost index exposure.
Core stock investors that actively track and follow individual stocks may consider adding an ETF satellite to get exposure to sectors and areas outside of their general expertise. For example, investors who feel confident picking Canadian stocks, ETFs can be used to add investments in areas such as fixed income, preferred shares, commodities, U.S., international and emerging market exposure or specific niche themes. Tracking all areas of the market is difficult -- even for the professionals -- so focusing on a few areas of expertise and interest such as dividend stocks or gold or energy stocks, and then using ETFs for exposure to other asset classes and markets can be a very successful long-term strategy for portfolio management.
The core/satellite structure is a popular and simple concept to keep in mind when constructing portfolios. ETFs can be well suited and add low-cost and broad diversification through easy-to-manage products. Complete core/satellite portfolios can be constructed using as few as five to 10 ETFs.
With a broad range of ETFs designed for both core and satellite market segments, we hope you'll consider Claymore's ETFs when constructing and rebalancing your portfolio.
