WATCH: How ETFs are used in portfolio construction

The growth in exchange traded funds (ETFs) was remarkable after their mass introduction in the early 2000s, and they continue to grow in number and popularity. The emergence of the investment vehicle has been great for investors, as new, low-cost opportunities are now available for nearly every asset class in the market.

However, investors now must also deal with sifting through more than 5,000 ETFs that are currently available globally, which can be a daunting task for the weekend investor. Asset allocation is one of the most important decisions that you make as an investor. Having the right mix of stocks, bonds, cash, and commodities in your portfolio, and being well diversified within each asset class, can have a profound effect on your returns.

ETFs can be an easy way to gain this diversification. They can be cheap, flexible and tax-efficient and may help you gain access to sectors and asset classes that would otherwise be closed off to individual investors.

Often we think of ETFs as targeted at the retail investor but actually we are seeing professional asset managers and institutions utilising these building blocks to build portfolios for clients. To talk about how stockbrokers are using ETFs to build portfolios, Business Day TV spoke to Struan Campbell, portfolio manager at PSG Umhlanga Stockbroking and a CFP who also provides an advice interface between managers and investors; Nicola McMurtry, senior portfolio manager at Anchor Private Clients, and Victor Mupunga, research analyst at Old Mutual Wealth