How many etf should i own

Fool Podcasts. New Ventures. Search Search:. Updated: Sep 9, at PM. Portfolio Size Advantages Disadvantages Large -- many stocks in portfolio High diversification reduces risks, including company-specific and sector risks Relatively protected against large losses Potential opportunities for tax-loss harvesting Can be cumbersome to manage Making many stock purchases can be costly, depending on your broker Requires more time and energy to maintain Small -- few stocks in portfolio Outperforming stocks can have a greater impact on your portfolio's value Your best ideas are more likely to be prominently featured Administratively easy to manage Lack of diversification creates potential for severe losses in your portfolio's value Increased company-specific, sector, and geographic risk Fewer opportunities to capture stock appreciation upside.

Join Stock Advisor Discounted offers are only available to new members. Stock Advisor launched in February of Prev 1 Next. High diversification reduces risks, including company-specific and sector risks Relatively protected against large losses Potential opportunities for tax-loss harvesting.

Can be cumbersome to manage Making many stock purchases can be costly, depending on your broker Requires more time and energy to maintain. Outperforming stocks can have a greater impact on your portfolio's value Your best ideas are more likely to be prominently featured Administratively easy to manage.

Lack of diversification creates potential for severe losses in your portfolio's value Increased company-specific, sector, and geographic risk Fewer opportunities to capture stock appreciation upside.

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The decision to invest to build long-term wealth is complicated by the plethora of choices. With thousands of funds available to U. Lee, a certified financial planner and founder of Delaware-based investment advisory firm StratFI.

We asked financial advisors to answer some common questions about selecting funds — such as mutual funds, index funds and exchange-traded funds — to build a retirement portfolio. The focus should be on determining the appropriate amount of allocations toward both domestic and international stock and bond markets, said Greg McBride, chief financial analyst for Bankrate, the North Palm Beach, Fla. A large percentage of employees fail to roll their k plan into an IRA and the unnecessary plan fees accumulate for many years, said Feilke.

While employees do not have any options when it comes to fees in a k plan, they can choose investments with lower fees such as index funds or ETFs. The number of ETFs in a portfolio also depends on how willing an investor is to devote time to choosing and monitoring their funds, but it can help them cope with unexpected volatility in the markets, said C. Brott, founder of Capital Ideas, a registered investment adviser in Dallas.

Owning five to six ETFs is a "great mix because having more makes it difficult to keep track of it," Brott said. Sticking with four ETFs and a money market account will "get most people where they need to be," said Andy Terry, a finance professor at the University of Arkansas at Little Rock and a partner in Aptus Financial. S equities," he said. By adding any another U.

The amount of money you allocate to each fund depends on your age, goals and risk tolerance. Stocks have delivered better returns than bonds and cash over the long term, as you can see from our analysis of the historical performance of stocks and bonds. Since the beginning of the Great Depression in October , the annualized return for U.

Meanwhile, bonds have provided annualized returns of 5. Younger people and more risk tolerant investors should overweight the total stock market fund in this three-fund model while older, more risk averse investors would do better to put more money into the broad market bond fund.

To sum up, in a three-fund portfolio you get growth from stocks, stability from bonds and additional protection from international stocks. Investing legends John Bogle and Warren Buffett have both advised that a two-fund portfolio is best for many, if not most, investors, and they agree that the best way to build a two-fund portfolio is to choose a U. They differ on the particulars of the asset allocation, however. A total U. Buffett made the advice in one of his letters to Berkshire Hathaway shareholders, indicating that this two-fund approach was how he would advise his trustee to invest money for his spouse upon his passing.

When you own a target-date fund, you get an entire retirement portfolio in a single fund. Instead of buying individual stocks or bonds, it buys a broad portfolio of different mutual funds—a so-called fund of funds. Named for the year when you plan to retire, target date funds adjust their holdings from higher-risk growth assets like stocks to safer, lower-risk assets like fixed income as the date on the fund approaches.

Once you choose a target date fund , all you have to do is set up automatic contributions and the fund managers handle everything else. They periodically rebalance the fund portfolio to make sure it adjusts to the right mix of stocks and bonds for where holders are in relation to retirement. With two decades of business and finance journalism experience, Ben has covered breaking market news, written on equity markets for Investopedia, and edited personal finance content for Bankrate and LendingTree.

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