Balancing a portfolio with ETF
A cap-weighted top 40 index tracker can act as a strong base to which riskier investments can be added, writes Pedro van Gaalen
Multiple factors have fuelled the sustained growth of exchange-traded funds (ETFs). Primary among these is the need for a solid foundation on which to build a balanced investment portfolio. Amid rising global risks due to trade wars, the impact of Brexit, currency volatility, oil-fuelled inflationary pressure and geopolitical instability, investors have sought the stable returns of passive cap-weighted ETFs as a core element of their portfolios. This purpose has entrenched these investment instruments as preferred long-term vehicles among many investors. "ETFs are becoming increasingly important in the construction of a balanced fund. An ETF is easily accessible through broker lines already in place and provides access to a wide range of investment opportunities," says Steven Empedocles, portfolio manager at Sygnia. "Choosing the right ETF can provide a well-diversified portfolio of assets to remove unsystematic risk, at low cost, and [ETFs] are liquid enough to implement tactical a...
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