How to choose the Etf portfolio models .pdf
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How to choose the Etf portfolio models?
ETF models are mostly used for asset allocation; it is an efficient approach to accumulate
the long-term prosperity from a highly diversified portfolio. Consequently, it allows seeking
risk and returning the objectives without paying a huge amount of fees. To employ this
diversification strategy, it is more important to decide how to position your portfolio
available in the given option. The ETF portfolio models are used for building an asset
allocation, where the portfolio is fairly simple, but making the portfolio with a right mixture
of assets is less straightforward. The portfolio models can be partitioned by its value and
growth, or by sector, it is benefiting from creating more portfolio models.
Here are three things investors can do to protect their investment portfolios:
1. Buy protective put option to minimize potential losses. Although it will typically make
little sense for an investor to purchase at the money puts to protect one's portfolio,
purchasing at prices that are 10-20% below their current values (assuming current values
are at a decent gain) will ensure the underlying securities will not impact the overall
portfolio in the event of a market correction. This is arguably one of the cheapest ways that
an investor can protect a portfolio since out of the money put options are always cheaper
than current-price put options.
2. Use bears Exchange Traded Funds to help offset risks. Depending on where the investor
sees risks to their portfolio, an appropriate bear-based exchange traded fund (ETF) can
actually help mitigate risks and stabilize a portfolio's total value. Using an ETF to achieve
this type of stability is one of the simplest ways that an investor can neutralize potential
risks. However, it is also a strategy that, if too broad, can neutralize returns as well (e.g. as
the portfolio increases, the ETF decreases, and vice versa; therefore, the investor must still
take a position as to the overall value of the portfolio and decide which risks warrant
3. Proper Asset Allocation. Unlike the two active strategies above, using a proper asset
allocation allows an investor to offset non-systemic risks, but asset-specific risks instead.
This is a more conservative approach in that the investor essentially believes that while one
asset class corrects, another will neutralize the impact of such a correction by either
sheltering some of the assets from broad selloffs or by actually increasing in value. This
strategy can also include options or bear-ETFs. However, it is still possible that all asset
classes can depreciate in value, thereby potentially exposing an entire portfolio to the risks
an investor wants to avoid altogether.
In ETF portfolio models when more asset classes are used for more transactions, then the
driving up the associated costs. A balance needs to strike between the management costs
and efficiencies gained from partitioning.