As the most important aspects of investing is diversification, ETF’s allow investors to purchase an “entire sector” of the market, greatly reducing the risk associated with individual stocks in individual sectors. Because they are not actively managed like mutual funds, their annual fees are MUCH lower. As you create your portfolio of high quality, diversified investments, ETF’s are a great way to achieve diversification while having the liquidity of common stocks.
The phrases “financial planning”, “family finance” and “estate planning” are ones we hear often in the media. There always seems to be one expert or another touting their wisdom or promoting an idea or product. Much of the information out there seems to be contradictory. However, there are some basic truisms in finance, and that is what I will focus on in this chapter.