ETFs and Asset Allocation

Abstract

In this article, the author examines the case for concentrating investment expertise and activity on asset allocation. He argues that asset allocation makes a dominant impact on results. He advises funds to implement their chosen asset allocations in low-cost liquid ways, using ETFs to get exposure to selected asset categories. The author considers the case for indexing; describes the task of asset allocation; proposes how asset allocation can be researched and determined; looks at how ETFs provide a good means of implementing an asset allocation; and examines the differing types of ETF, explaining some of the risks and considerations needed when selecting which ETFs to use.