Opinions expressed by Entrepreneur contributors are their own.
Exchange-traded funds, or ETFs, are hot. Around for almost 15years, these index-like investments have finally caught on likewildfire with investors, and for good reason: They trade likestocks, are inexpensive to own and offer plenty of choicesrequiring no long-term investment commitment.
Each ETF represents a basket of securities: Some are broad-basedand index-related, like the popular Nasdaq-100 Index ETF; othersare country-, industry- or sector-specific, such as Vanguard'sEnergy VIPERS. ETFs may be used as core investment holdings; forportfolio diversification; for hedging; or for cash management,rebalancing or tax-loss strategies. Plus, annual expenses are onlyabout 25 basis points a year (or 0.25 percent).
Before investing, do some research, then ask yourself: Do I wantETFs to be my core investments, or to act like accessories to fillin various sector needs? In case you're wondering, most prosthink ETFs are a great way to diversify their clients' assetsacross various asset classes. You can start your research atwww.amex.com,www.ishares.com, www.streettracks.com and www.vanguard.com.
ETFs can jazz up your portfolio, but they aren't risk-free.Also, keep in mind that market performance runs in cycles. Be sureto consult your financial advisor to find out if and when ETFs areright for you.
