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The ETF Store is a fee-based, registered investment advisor based in Kansas City, Missouri. We believe that superior investment returns can best be achieved by investing in a globally diversified portfolio of equities, fixed income securities, commodities and real estate, and that ETFs are the... More
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  • A Handful Of ETFs, A Boatload Of Diversification 0 comments
    Jul 3, 2013 1:51 PM | about stocks: WIP, SCHB, VEU, AGG, TIP, BSV, VNQ, RJI

    Listen to The ETF Store Show every Tuesday at 9am on ESPN 1510 as we cover everything you need to know about Exchange Traded Funds and the world of investing.

    Click here to listen to The ETF Store Show now.

    On our most recent radio broadcast, we explained how you can build an institutional caliber investment portfolio using just a handful of exchange traded funds. The term "institutional caliber" oftentimes gets tossed around without much credence. However, over the past several years, more and more large, institutional investors, such as pension funds and endowments, are actually managing their hundreds of millions (if not billions) of dollars using a modest number of ETFs. In an article we highlighted on the show last year from Pensions & Investments titled "More Pension Funds See Value Investing in Fixed Income ETFs", both the Virginia Retirement System and Stanford University's endowment were cited as examples of large institutional investors using ETFs. The article also quoted Blackrock Chairman & CEO Laurence Fink who said his company had worked with "an unidentified large pension fund to shift 4,000 individual bond issues into four iShares ETFs". More recently, as chronicled in the Wall Street Journal article "Pension Fund Takes Neighborly Advice", the $470 million Montgomery County Pennsylvania pension fund announced that after meeting with Vanguard founder Jack Bogle, they decided to move nearly all of their money into just a handful of index funds tracking broad stock and bond markets. In the article, the chairman of the Montgomery County Board of Commissioners said, "The folks on Wall Street do valuable work, but there is no value for the county and other municipalities to be spending these fees and getting a lower return".

    At the end of the day, that's exactly what's driving this shift towards index based ETFs and away from other types of investments such as actively managed mutual funds: lower investment costs and removing the risk that an active manager will fumble their investment selection and return something less than the market benchmarks. These are two of the key reasons we prefer ETFs at The ETF Store. Another key factor is simply that broad based ETFs can offer excellent portfolio diversification. On the show, we drove home this point by showing you how a lineup of just six ETFs can immediately allow you to have exposure to over 4,000 stocks across the globe, over 1,900 bonds and even some alternative assets such as real estate and commodities - all for around 20 basis points, or 0.2%. Compare that to the expense ratio on the average actively managed equity mutual fund which will run you in the neighborhood of 1.4% and can only offer exposure to stocks. It's pretty easy to see why more pension funds and endowments are moving to ETFs.

    In our weekly market update, we continued our discussion on the recent spike in interest rates and explained how the last few weeks have offered a classic lesson in not overreacting to short-term, headline driven market moves. We also discussed gold's rough year and the overall role of gold in your portfolio. In our weekly ETF Spotlight segment, we delved into an international, inflation protected bond ETF, the SPDR DB International Government Inflation Protected Bond ETF - ticker WIP. If you're concerned about inflation in foreign countries and/or if you think that the US dollar will decline, this could be a solid option in the fixed income portion of your investment portfolio. Learn more about WIP by visiting

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