Fixed-income ETFs work for institutional investors and advisors.
3 factors affect how well an ETF tracks the underlying index
Fixed-income ETFs hold significant potential for institutional investors, who are using them in increasingly sophisticated ways.
Risk is a difficult concept for investors when it comes to investment selection.
The balance between return and risk is often equated with the trade-off between health and exercise. While all investors have an appetite for greater wealth (being healthy), they also have a limited tolerance for risk (exercise). Unfortunately, risk is a difficult, often abstract, concept for investors — especially when it comes to investment selection. As a result, risk is usually ignored altogether.
Even as the exchange-traded funds (ETFs) industry expands, headlines are calling the funds into question: The Globe and Mail advised “How to protect yourself from ETF pain” just days after the May “flash crash,” and more recently, the Financial Post linked the two, with the headline “ETFs called a ‘Frankenstein’ that creates risk of ‘flash crashes.’” Even when the tone is somewhat conciliatory, such as the Wall Street Journal’s, “Are ETFs a menace — or just misunderstood,” it’s far from upbeat.
In today’s environment, many expect they’ll need ways to supplement the income they’ll earn from pension plans with other investments. In doing so, they’re increasingly recognizing that the benefits of ETFs — low cost, transparency, liquidity and easy diversification — also make them an ideal part of a well-diversified retirement portfolio. ETFs are growing rapidly […]